Today's Coming Crisis Movie

Thursday, May 31, 2012

Spain is crying for help, but is Berlin listening?...We are all in this together didn't last too long did it?

(Reuters) - Crisis is the watchword in Madrid. Take your pick - liquidity crisis, debt crisis, banking crisis, economic crisis, confidence crisis, investor crisis, jobless crisis. Spain, the ailing euro zone's latest problem child, has them all.

As the problems pile up, Prime Minister Mariano Rajoy's five-month-old conservative administration feels like a government under siege. Nervy top officials are reluctant to speak on the record for fear of slipping up. Policymakers contradict one another. Plans keep changing. Financial markets reel amid the uncertainty. The gloom in ministry corridors is palpable.

The latest gaffe: after weeks insisting that one of the country's biggest banks, Bankia, did not need fresh funds, ministers dropped the bombshell last Friday that there was a 23-billion-euro hole in the accounts. They have yet to explain clearly how they will find the money when they are already struggling to finance a spiraling national debt.

The effect of the Bankia news on fragile financial markets was devastating. Spanish shares dived to 9-year lows, the euro sank and investors fled Spanish government debt, pushing the yield towards the 7 per cent level at which fellow eurozone members Ireland and Portugal were forced to seek national bailouts from Brussels. Read More