(menafn – ecpulse)
Despite the efforts done by European officials to ease the debt crisis, worries spread in markets after the rise in Spanish 10-year bond yields to 6 percent, coming close to levels which forced Greece, Portugal and Ireland to ask for international bailouts.
On the other hand, Bank of Spain published on its website that Spanish banks' borrowing from the ECB skyrocketed by nearly 50% last month. Domestic banks borrowed 227.6 billion euros in March compared to 152.4 billion euros in February.
Spanish banks tapped 29% of the aggregate long-term loans offered to euro-area lenders, including the three-year long-term refinancing operation loans which were launched by the ECB since last year. Also, they borrowed more than 60% of the loans received by other euro-zone banks, according to the data.
Although Spain's 10-year bond yields retreated by the end of the week, concerns remained as the Bank of Spain's announcement mirrored the high reliance of Spanish banks on the ECB's emergency loans to cure its ailing fiscal position and pump liquidity.
In fact, some of the tensions eased after European Central Bank Executive Board member Benoit Coeure clarified that the European Central Bank might revive the bond-purchase program to prevent rising borrowing costs from pressuring Spain to ask for an international bailout.
ECB President Mario Draghi, on the flip side, stressed on the positive effect of the LTROs on bank's lending stating that "any exit strategy talk is premature," where he expects euro area economies to recover gradually with the likelihood of seeing a contraction in the first quarter.
Worries that debt contagion may spread to the region's debt-trapped nations causing an exacerbation in the debt dilemma, especially as bailing out economies with the size of Italy and Spain is not guaranteed despite the increase in the European rescue fund by 500 billion euros in addition to the current 300 billion euros to create a total of 800 billion euros to combat crisis.
However, Spanish Prime Minister Mariano Rajoy said Spain will not need a bailout.
Italy sold bills last week, where the auctions saw a rise in yields. The government borrowed 8 billion euros from the 361-day bonds with a surge in borrowing cost to 2.84% compared to 1.405% in the last auction on March 13, while it sold 2.88 billion euros of three-year notes with a surge in borrowing cost to 3.89% compared to 2.76% in the last auction a month earlier.
Moreover, Charles Dallara, head of the institute of International Finance which represents more than 450 firms, stressed on the threat of excess short-term austerity in Europe as it could hurt growth and thwart recovery.
After recording 0.2% expansion in the fourth quarter, the French economy probably posted no growth in the first quarter, according to Bank of France's monthly report which said there are no signs of improvement in the economy's economic activities in the coming few months after a report showed that business sentiment indicator for industry lingered at its lowest level in 3 months at 95 in March, while services sentiment also steadied at 93.
Thus, it seems that the European debt crisis is still facing troubles to move to the safe side with banks in difficult situation and governments trying to cut spending which probably shaves growth and raises unemployment.
Despite the efforts done by European officials to ease the debt crisis, worries spread in markets after the rise in Spanish 10-year bond yields to 6 percent, coming close to levels which forced Greece, Portugal and Ireland to ask for international bailouts.
On the other hand, Bank of Spain published on its website that Spanish banks' borrowing from the ECB skyrocketed by nearly 50% last month. Domestic banks borrowed 227.6 billion euros in March compared to 152.4 billion euros in February.
Spanish banks tapped 29% of the aggregate long-term loans offered to euro-area lenders, including the three-year long-term refinancing operation loans which were launched by the ECB since last year. Also, they borrowed more than 60% of the loans received by other euro-zone banks, according to the data.
Although Spain's 10-year bond yields retreated by the end of the week, concerns remained as the Bank of Spain's announcement mirrored the high reliance of Spanish banks on the ECB's emergency loans to cure its ailing fiscal position and pump liquidity.
In fact, some of the tensions eased after European Central Bank Executive Board member Benoit Coeure clarified that the European Central Bank might revive the bond-purchase program to prevent rising borrowing costs from pressuring Spain to ask for an international bailout.
ECB President Mario Draghi, on the flip side, stressed on the positive effect of the LTROs on bank's lending stating that "any exit strategy talk is premature," where he expects euro area economies to recover gradually with the likelihood of seeing a contraction in the first quarter.
Worries that debt contagion may spread to the region's debt-trapped nations causing an exacerbation in the debt dilemma, especially as bailing out economies with the size of Italy and Spain is not guaranteed despite the increase in the European rescue fund by 500 billion euros in addition to the current 300 billion euros to create a total of 800 billion euros to combat crisis. However, Spanish Prime Minister Mariano Rajoy said Spain will not need a bailout.
Italy sold bills last week, where the auctions saw a rise in yields. The government borrowed 8 billion euros from the 361-day bonds with a surge in borrowing cost to 2.84% compared to 1.405% in the last auction on March 13, while it sold 2.88 billion euros of three-year notes with a surge in borrowing cost to 3.89% compared to 2.76% in the last auction a month earlier.
Moreover, Charles Dallara, head of the institute of International Finance which represents more than 450 firms, stressed on the threat of excess short-term austerity in Europe as it could hurt growth and thwart recovery.
After recording 0.2% expansion in the fourth quarter, the French economy probably posted no growth in the first quarter, according to Bank of France's monthly report which said there are no signs of improvement in the economy's economic activities in the coming few months after a report showed that business sentiment indicator for industry lingered at its lowest level in 3 months at 95 in March, while services sentiment also steadied at 93.
Thus, it seems that the European debt crisis is still facing troubles to move to the safe side with banks in difficult situation and governments trying to cut spending which probably shaves growth and raises unemployment.
