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Spain eases debt crisis tensions with new bond auction
Published in Saudi Press Agency on 13 - 01 - 2011


Spain successfully sold new bonds
totalling nearly 3 billion euros (3.9 billion dollars) on Wednesday
in what was seen as a major test of Europe's chances of containing
the debt crisis gripping parts of the region, according to dpa.
The yield on the five-year bonds came at 4.59 per cent, compared
to an average yield of 3.6 per cent when similar bonds were last
auctioned on November 4.
Madrid's first bond action of the new year was more than two times
oversubscribed.
Both the euro and eurozone shares edged up in the wake of the
successful launch of the new Spanish bond issue. At the Madrid stock
exchange, the main Ibex-35 index rose by more than 2 per cent.
Also buoying market sentiment were signs that Europe's political
leadership were moving to draw up new plans to allay investors' fears
about the debt crisis, that has already forced Greece and Ireland to
seek a European Union-led bailout.
While the eurozone's blue-chip Eurostoxx 50 edged up 0.6 per cent
to 2897 points, the common currency crept back up above the
1.33-dollar mark in early European trading.
But this week's auctions are likely to provide the currency bloc's
most indebted nations with only a breathing space.
Analysts say the cash-strapped members of the eurozone will face
another major test in April, when a batch of bond redemptions are
due.
European officials had been concerned that an eventual
international bailout of Portugal could spill over into Spain, which
has a much bigger economy. This could eventually have paved the way
for a breakup of the 17-member eurozone.
However, Portugal's success in auctioning 10-year-bonds on
Wednesday eased the pressure on Spain, whose government has adopted
austerity and structural measures to deal with its economic problems.
Among Spain's problems are a 2009 budget deficit of 11.1 per cent
and an unemployment rate of about 20 per cent, the highest in the
European Union.
The government has slashed spending by tens of billions of euros,
including cuts in public sector salaries, public investment and
social spending, along with tax hikes and a pension freeze.
Prime Minister Jose Luis Rodriguez Zapatero's government also
introduced a controversial reform to make the labour market more
flexible. It is currently trying to persuade trade unions to accept
another reform, which would raise retirement age from 65 to 67 years.


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