Speculation is mounting that Spain will ask for a bailout from the Eurozone next month with Eurozone officials suggesting that the loan programmes for other indebted nations such as Greece could be revised if it does.
The markets have been frustrated with Spain for the past few weeks over its hesitation over requesting financial assistance. On numerous occasions the country’s Prime Minister Mariano Rajoy and other senior Spanish ministers have denied the need for such a request despite evidence to the contrary.
Since the onset of the economic crisis Spain has seen its banks crippled, its autonomous regions drowning under a mountain of debt and is in its second deep recession in three years. Unemployment is at a record high and talk of independence from some regions has caused some to worry over the future existence of the country in its current form. In June Madrid was forced to request a €100 billion lifeline for its struggling banking system.
An anonymous aid told the press; “We’re moving, we’re taking steps, we’re preparing it, things will crystallise in November,” said a senior official who is directly involved in talks about a potential Spanish aid. The official spoke on the condition of anonymity because of the sensitive nature of the discussions. Asked to clarify if this meant an aid request was expected in November, he said: “I am confident this will happen then, in November.”
A Eurozone official also hinted at November being the month when speculation will finally end. “If I had to bet, it would rather be in November than in October, if ever. Then it would be a package – you would have Greece and Cyprus and Spain. I think not Slovenia, The is because the Germans and others do not want to go many times to national parliaments and have painful, tortuous debates there.”
A consequence of the Spanish dithering is that it could have sabotaged its own chances of receiving the bailout funds it needs. In the months it has taken for them to decide the German parliament and lawmakers arguing against bailouts. The Dutch and Fins have also grown increasingly vocal in their opposition.
“It is not helpful that Spain is waiting. We have a framework and they would be better off, safer, if they would use that framework. It is a bit of a loss of time,” a third senior Eurozone policy-maker said. “I would expect them to ask. It is not a question of policy-making in Spain. It is a question of market dynamics. Now that the framework has been announced, it has to be used,” he added.
As a result of the speculation the currency markets has seen the Euro consolidate its position against a basket of currencies. Concerns over faltering growth in the region have been threatening to overshadow hopes that the region’s leaders will make progress on resolving the debt crisis.
In recent days the single currency dipped against 10 of its 16 major counterparts as investors take a wait-and-see approach over whether Spain will soon request a bailout. The key focus for the Euro this week is the meeting of EU leaders in Brussels due to be held on October 18th.
As of 10:20am
The Pound to Euro exchange rate is currently trading at 1.2392
The Pound to US Dollar exchange rate is currently trading at 1.6060
The Pound to Australian Dollar exchange rate is currently trading at 1.5697
The Euro to US Dollar exchange rate is currently trading at 1.2957
The Euro to Pound exchange rate is currently trading at 0.8066
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