Spain may seek additional euro aid next month

The Spanish recession is deepening and there is little hope for a turnaround anytime soon. This is putting pressure on the Spanish government to ease up on austerity measures designed to cut the budget deficit in order to reduce the cost of borrowing. While the cost of short term bonds has fallen, the meat and potatoes of the Spanish debt problem arises in costs associated with 5 and 10 year bonds that are still very high. But does Prime Minister Rajoy have the political capital to keep Spain on track to reach their deficit targets? They may need some help in the form of more funding from the EU. Bloomberg: "We fear that things are likely to get worse before they get better," said Martin van Vliet, an economist at ING Bank in Amsterdam, who expects Spain will seek additional financial aid as early as next month. "With much more fiscal austerity in the pipeline and unemployment at astronomic highs, the risks are clearly tilted toward a more protracted recession." Separate data today...(Read Full Post)