Econintersect: Spain has been suffering under an austerity that has pushed unemployment to 21.3% and over 40% among the young. But that has not been enough to remove the country from from pressure regarding its sovereign debt. Monday (May 23) the Spanish 10-year bonds opened a 250 basis point spread against the equivalent German bund and the Madrid stock market closed 1.4% lower.From Yahoo News:
The governor of the Bank of Spain said the country cannot sustain spreads of more than 200 basis points for a long period because this will raise government borrowing costs and leave less money available for providing financing for companies and getting stagnant credit flowing again.
Miguel Angel Fernandez Ordonez also said in a speech that the government needs to press ahead quickly with labor market reforms to create jobs and reassure investors. He called for more flexibility in how collective bargaining agreements are negotiated. Economists say the current system is too rigid because in a given sector it treats money losing and profitable companies with the same terms when it comes to giving workers raises.
Tuesday (May 24) Spain’s credit will be tested with the auction of 3- and 6-month bills.