Spain’s banks have been granted a bailout package of up to 100 billion euros. On news of the aid, the market reacted optimistically before reversing its sentiments. Now Spanish and Italian bond yields are rising once again.
Josh Raymond, Market Analyst for City Index, says uncertainties are creeping into the fray:
“Whilst the bailout is absolutely necessary, it doesn’t really fix anything in the long term, it’s almost like it’s a plaster made out of banknotes essentially, whilst you need a much stronger fiscal surgery that’s required both for banks and for the Spanish economy as a whole, because of course you’ve still got unemployment one in four. So from that perspective there are still a long of uncertainties regarding the mid to long-term picture.”
And it’s not just Spain that’s on track for a bailout. Not regularly on the international radar, Cypress is reeling from overexposure to instabilities in Greece and is now sounding the drums about possibly needing its own bailout package.
Greece itself, depending on the outcome of the June 17 elections, may view the deal Spain struck as a good reason to seek renegotiation of its current bailout terms, says James Hughes, Senior Market Analyst at Alpari:
“What will Greece think of this bailout without the austerity measures? And you’ve also got stories coming up to this Greece election that some of these Greek parties are looking for ways to exploit the Spanish bailout for the Greeks and then, we’ve still got the issue that when we get to this Greece election and it comes out whichever way we think it’s going to come out, we still have got exactly the same problems… as Greece may not be there [as a member of the eurozone].”
In the end, the Spanish bailout might have been viewed as a kind of closure for the ailing country, but now it appears that it’s only increased the uncertainties and worries in the eurozone that the economy may not see stability for some time yet.