Maria Fekter: Rome's
Deficits and Debt May Force Bailout
June 12, 2012
Europe's governmental debt crisis is deepening, with Spain's borrowing
costs reaching their highest point since the launch of the euro currency
13 years ago.
European governments agreed to a $125 billion bailout for Spanish banks
over the weekend, but investors have shown little regard for the rescue
package. The Fitch financial services firm downgraded the credit ratings
for 18 of the country's banks and the interest rate on 10-year Spanish
bonds neared 7 percent. That is the level at which Greece, Portugal and
Ireland all were forced to seek international bailouts in the last two
Italy's borrowing costs also advanced sharply, moving above 6 percent.
Austrian Finance Minister Maria Fekter drew the ire of Italy by
suggesting that Rome's "very high deficits and debt" may force it to
seek a bailout. Italian Prime Minister Mario Monti called her comments
Several financial analysts said the uncertainty of the terms of the
Spanish bank bailout contributed to the increase in government borrowing
costs. Analyst Daniel Alvarez at XTB Brokers also said there is the
unpredictability of next Sunday's Greek parliamentary elections that
amount to a referendum on whether Greece stays in the 17-nation eurozone
or becomes the first country to leave it.
because we don't know the details of the [bailout] plan and it seems
that in Europe everyone has a conflicting voice and there is an enormous
lack of consensus which means we don't know the exact details," said
Alvarez. "Second, undoubtedly the timing is also an important reason.
It's true that it was urgent to take that measure [bailout], a measure
which as far as we know continues to be positive, but the fact is that
the rescue of the Spanish banking sector will be associated with the
next element, the next important event in the markets which is none
other than the Greek elections this weekend."
Alvarez said investors' fears are not just focused on Spain's precarious
financial state, but rather on the eurozone as a whole.
"The attack is not on Spain, the attack is on Europe as a project and
that is something we must all have clear, and proof of that is that the
Italian MIB index was the one that fell most [Monday] - almost 3 percent
on market closure - so it's clear the attack is on Europe,'' said