New Spanish leader fails to calm markets

Tim Wallace
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YIELDS hit a 14-year high on short-term Spanish debt yesterday, as the country’s new Prime Minister failed to announce a plan to extricate the country from its debt crisis.

Belgium too felt the markets’ heat, and the IMF stepped in with an offer of increased aid for countries with sound fundamentals but temporary debt problems.

Spain’s Popular Party won the weekend’s general election, but new Prime Minister Mariano Rajoy refused even to choose an economy minister until he is sworn in on 20 December.

Hopes were high that his election with a large majority would allow the country to turn a corner, putting government finances on the path back to stability.

However, investors were alarmed by the lack of policy announcement, demanding yields of 5.11 per cent and 5.227 per cent for €2.98bn (£2.57bn) in three-month and six-month bills respectively.

Those yields are up from 2.292 per cent and 3.302 per cent when similar bills were sold just a few weeks ago.

Meanwhile yields on 10-year Belgian government bonds smashed through the five per cent mark, rising 0.256 percentage points to hit 5.096 per cent.

The jump came as the six-party talks to put together the 2012 budget failed to make progress.

The IMF stepped into the crisis with increased liquidity offers to countries which need help but can be trusted to carry out “sound” fiscal policies.