Spain defaulted on its debt six times in the 18th century, and seven times in the 19th century.
It made it through the 20th century without reneging on its debts, and hasn’t defaulted in the 21st century (yet).
ALL EYES ON THE G20
This week should be interesting, regardless of the coalition negotiations in Greece. In the aftermath of Fitch and Moody’s downgrading Spain, Mexico will host a summit of G20 leaders today and tomorrow. It will almost certainly be dominated by the Eurozone debt crisis.
We should find out how Spain plans to use the up-to-€100bn (£80.4bn) that finance ministers have agreed to lend to shore up its banks. Whichever route they take, the sooner Spanish leaders communicate their intentions the better, after borrowing costs hit a record high last week, and European Central Bank (ECB) data showed Spanish banks borrowed a new record of around €325bn in May.
PORTUGUESE BORROWING HITS HIGH
But it’s not just Spain going to the ECB – Portuguese borrowing in May also hit a record high of almost €59bn – showing that the interbank lending market remains sticky for peripheral Europe.
When looking at banks across Europe, Standard & Poor’s states that of the 50 largest rated European banks, 27 currently have negative outlooks or negative credit watch placements, reflecting their view of the difficult environment across the region.
WILL THE FED TWIST AGAIN?
This week also sees the US Federal Reserve meeting on 19-20 June. The key question is whether the Fed will indicate another round of Operation Twist (swapping short duration bonds for longer duration bonds), or whether it might show a willingness to support the market by directly buying bonds.
Most market participants now expect Fed and ECB stimulus before the summer is over.
Gary Baker, head of European equities strategy at Bank of America Merrill Lynch, says his latest research shows 73 per cent of respondents now expect more quantitative easing from the ECB over the next four months, up from 46 per cent who expected new cash injections when they were surveyed in May. Expectations of more QE from the Fed also rose, with a net 44 per cent of respondents expecting further action compared with 31 per cent in June. Greece may have backed a pro-bailout party – but the fun is just about to begin.
Louisa Bojesen is a CNBC anchor. Follow her on Twitter @louisabojesen