Spain woke up today with a dark cloud over its fiscal situation, Reuters reports. Following a downgrade of its credit rating by Moody’s Investors to just above “junk” status, 10-year government bond yields rose up to a record high of 7.02 percent. This compares to “the 7 percent mark that drove Greece, Ireland and Portugal to seek international bailouts.”
The rise in bond yields is also attributed to a statement made by the German chancellor:
Germany, Europe’s most powerful economy, rebuffed calls from other European leaders to help underwrite the region’s debt or guarantee deposits in euro zone banks. Chancellor Angela Merkel, addressing parliament in Berlin, labeled ideas such as issuing joint euro bonds or creating a Europe-wide bank deposit guarantee scheme as “miracle solutions”, and said they were “counterproductive” and would violate the German constitution.
Meanwhile, Greeks are preparing for an election this weekend by withdrawing massive amounts of money from their bank accounts and hoarding non-perishable foods from supermarkets.
Reuters reports that the results of Sunday’s vote is anyone’s guess:
The last published opinion polls showed the conservative New Democracy party, which backs the 130 billion euro ($160 billion) bailout that is keeping Greece afloat, running neck and neck with the leftist SYRIZA party, which wants to cancel the rescue deal.