News of Spanish Bank Bailout Doesn’t Satisfy Global Markets
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JUDY WOODRUFF: And we turn again to the European economic crisis and the problems it poses here and globally.
One of Europe’s larger economies in Spain is especially threatened. This weekend, leaders announced a major bailout of its troubled banks. But, once again, there are questions about the latest rescue package.
Markets around the world initially soared today on hopes that a new rescue package would go a long way toward bolstering Spain’s ailing bank sector. But the early optimism was overtaken by worries that the bailout isn’t enough.
ROBERT HALVER, head of market research, Baader Bank (through translator): Spain’s problems have not been solved. They have just been moved. The clock for the eurozone has turned back from five-to-12:00, to 10-to-12:00, so we won a little bit of time. But the main problem is still the Spanish economy and its inability to carry out reforms. And that is something that needs to be worked on.
JUDY WOODRUFF: On Saturday, Spain’s economy minister formally asked for aid. The 17-nation Eurozone responded, approving a loan of up to $125 billion.
Spanish Prime Minister Mariano Rajoy.
MARIANO RAJOY, Spanish prime minister (through translator): I would like to thank the Spanish people, as they understand some of the decisions that we are taking. They have been difficult, hard and complicated, but believe me that it is vital that these decisions are taken to get out of this situation.
JUDY WOODRUFF: Spain has the fourth largest economy in the Eurozone, but the country’s banks have been saddled with toxic assets since the real estate bubble collapsed. And high borrowing costs have curtailed the Spanish government’s ability to help.
Still, the rescue package triggered mixed reaction in Madrid.
MILANOS MARINEZ, Spain (through translator): I trust the government we have now much more than the previous one. They seem to be more prepared.
REBECA CLAUDIO, Spain (through translator): I do not feel totally safe because after this bailout, we don’t know how this is going to end up, and how we are all going to end up. How are we all going to end up paying for this?
JUDY WOODRUFF: The uncertainty underscores Spain’s perilous state, stuck in its second recession in three years, with one out of every four people unemployed.
Three other debt-stricken European countries have already sought international aid: Greece, Portugal and Ireland. But if Greece’s anti-bailout left-wing Syriza Party wins Sunday’s elections, Greek membership in the Eurozone could be in jeopardy. That prospect would put even more pressure on Spain, which may be why Madrid acted now, to avoid the potential market chaos.