Euro in turmoil as Spanish Prime Minister holds talks with US President Barack Obama

LAST UPDATED: 4 Sep, 2011 @ 09:17
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Euro in turmoil as Spanish Prime Minister holds talks with US President Barack Obama

By James Bryce

SPANISH Prime Minister Jose Zapatero has been forced to cut short his holiday in a desperate bid to save the Spanish economy.

The PM held talks with US President Barack Obama on Monday in which the leaders discussed the latest developments in the European economic crisis.

It comes as fears over the state of the Spanish economy intensified this week, with an EU bid to buy up government bonds failing to stabilise the markets.

The European Central Bank (ECB) did not say how many bonds it had bought or what they were but estimates suggest it was between 3.5 million and five million euros from Spain and Italy.

The ECB announcement saw yields on Spanish 10-year bonds fall sharply from more than six per cent to around 5.2 per cent.

The news initially had a positive impact on the markets as Spain’s Ibex 35 rose 2.6 per cent on Monday, before later slipping back.

The volatility of the markets was fuelled further following the announcement that the US’ credit rating had been controversially downgraded from AAA to AA+ status for the first time in its history.

Spain’s finance ministry has promised budget measures worth five billion euros to ensure it meets this year’s deficit reduction target.

The Bank of Spain estimated the economy grew just 0.2 per cent in the second quarter compared with the first three months of the year.

In a bid to reassure jittery investors, EU Economic and Monetary Affairs Commissioner Olli Rehn, said: “Spain has committed itself to broad ranging measures.

“It has made major progress in the areas of fiscal consolidation, banking sector restructuring, pension reform, as well as labour and product market reforms.”

4 COMMENTS

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  1. I suggest that Spain:-
    – Leaves the EU and Eurozone
    – Returns to the Peseta as a floating currency
    – Defaults on maturing bonds but rolls them over to new bonds paying a reasonable amount of interest. Spain can print the persetas required.
    – Balances its annual budget.
    – Ceases involvment in any direct activity that can be handled by the private sector.

  2. I travel toBarcelona about 4 years ago from Canada. In Barcelona people party all night, every one has a good time. The tomato on farmer markets the big one sells for €7 per kilo and for 3 bananas I pay €3, I ask myself what is going on: Spaniards rich Canadians poor? Now you can see, they borrow to party, thy borrow and borrow to show off.
    Now is the time to pay back, not borrow more and more, who is lending Spain more money and why?
    Have a good pay back time Spain.

    Broke Canadian – Canada

  3. I think Capitan Zapatero just wanted to know from Admiral Obama what retirement rating Hawaii has AAA+++ ….. you know, when is Pineapple season, whats golf like, where to buy the real shirts, where to get a real good Hula-Hula ……..

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