By TraderVox.com
Tradervox (Dublin) – The EU Summit meeting held last week raised more questions than answers as leaders from the region crashed on issues pertaining to the solution of the region’s debt crisis. Angela Merkel, the German Chancellor and the new French President Francoise Hollande raised their different proposition of how the debt crisis should be dealt with. They crashed on whether the region should introduce a new euro bond to help safe guard the region from spiraling into a recession. Further, the Spanish Prime Minister urged the ECB to act in order to bring down the country’s rising borrowing cost.
Mariano Rajoy, the Spanish Prime Minister, said in a speech after the EU summit on May 24 that the unsustainable public debt is the problem and urged the European Central Bank to take a decision that it had taken before. He was referring to the ECB’s decision to buy Spanish bonds in August which helped to reverse the surge of the country’s bonds. Further, the bank channeled $1.3 trillion of three year loans to the region’s financial institution in December and February. The Spanish Prime Minister also indicated that the measures he was proposing could be taken in 24 hours by the ECB, where he suggested that guaranteeing the sustainability of the public debt was the most important.
Spain has seen 16 of its financial institutions being degraded by moody’s which has increased fears of the region’s economy. Further, the surge of the 10-year bond yield has also raised concerns that the country may require international bailout just like Portugal, Ireland and Greece. The country’s ten-year bonds has risen 150 basis points from March second when the country missed the deficit target. Despite Rajoy’s argument to get ECB involved, the ECB President Mario Draghi indicated that the Rajoy was not calling on ECB to give the country funds to reduce its debt and suggested that liquidity could be provided through other means.
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