Stock markets rally on Spain’s rescue plan
Stock markets across Europe and Asia rally on news of Spain’s 100bn euro banking bailout, after the country’s economy is hit by the collapse of the property market.
On Saturday, eurozone ministers agreed to lend Spain’s banks up to 100bn euros ($125bn; £80bn).
In early trading, the FTSE 100 in London rose 1.7%, the Dax in Frankfurt was up 2.3% and Cac 40 in Paris was up 1.8%. Spain’s benchmark index, the Ibex in Madrid, rose 4.5%.
The euro gained more than one cent against the US dollar.
On the bond markets, the yield on Spanish 10-year bonds dropped below 6%.
Bond yields are a measure of the interest rates that governments would need to pay to borrow money.
Spain’s exact level of emergency funding will be confirmed later this week after an audit of two of its main banks.
Spain is in its second recession in three years and the economy is expected to shrink by 1.7% this year.
Spain is one of the eurozone countries scrambling to introduce cost-cutting measures, while almost one quarter of the workforce is currently unemployed.
More than half of 18-25-year-olds seeking work in Spain do not have a job.
Spain’s weakest banks were left with billions of euros of bad loans following the collapse of a property boom and the subsequent recession.
Among these is Bankia, made up of seven rescued Spanish banks, has been part-nationalised by the country’s government.
Last month, Mario Draghi, president of the European Central Bank, criticised Spain for ‘underestimating’ Bankia’s problems.
A large part of the housing stock in Spain is owned by the banks themselves. And in some cases, they are still offering 100 per cent interest-only loans on those properties, as long as buyers pay the old, inflated prices.