This week Madrid will put themselves to the test. After 15 days of absence, he will return to the markets on Thursday with an auction of three-, five- and ten-year Bonos. And the risk that a slight rise in yields will revive speculation on sovereign bonds is strong. Within seven days the center of the storm went from Grexit to Spanic: the ghost of a Lehman Brothers made in Spain capable of creating the same panic of September 2008 scares citizens more and more, who have already withdrawn over 1 billion in savings from Bankia, the credit institution where most of the money is accumulated of toxic securities linked to the real estate sector.
Pressure on Spain is coming from all corners. On the one hand, speculation about a possible Greek exit from the euro is increasing distrust in peripheral countries, but on the other, the problem of Bankia, with its 40 billion euro of toxic assets, is definitely the factor that feeds the uncertainty towards Madrid. In fact, it is feared that it is not the only case and that junk credits also emerge from other credit institutions.
Meanwhile the spread between ten-year Spanish government bonds and the corresponding German Bunds remains above 530 points, and last week it hit its all-time high since the creation of the euro at 547bp. The Minister of Economy, Luis de Guindos, acknowledged that such high financing costs “are not sustainable in the long run”. The secretary general of the Treasury is more optimistic, for whom there are no problems because Madrid has "already covered 58% of the needs for this year".
While Monti's Italy is getting closer to Hollande's France, in two-speed Europe Spain is getting closer and closer to Ireland, Greece and Portugal. Undoubtedly the Iberian country needs external help but Prime Minister Mariano Rajoy is trying in every way not to tie hands with international creditors (especially the Monetary Fund). Rajoy hinted of be willing to surrender part of its sovereignty to Europe in exchange for solidarity and aid for the banks and a new credibility before the eyes of the strict Germans. According to El Pais, Minister de Guindos is also undertaking a series of negotiations with European partners to find a solution to the crisis in the Iberian banking system without having to resort to an international bailout.
The markets are now waiting two key appointments: the elections in Greece on 17 June and the European summit on 28-29 June. According to various analysts, Europe will be saved if the pro-bailout parties win in Athens and if European leaders negotiate greater political cohesion, primarily through theBanking union (as proposed by the four major Community technicians) which will benefit first of all the Iberian banks. Until then, the financial markets will not be safe from speculation.
