European stocks slide on Spain bailout fears
European stock markets and the euro slumped on Wednesday as markets braced for a full bailout of Spain, ahead of the Spanish government's unveiling of new cost-cutting measures.
European stock markets and the euro slumped on Wednesday as investors increasingly anticipated a full bailout of Spain, and owing to falling confidence in the US Federal Reserve’s latest stimulus plan.
Madrid’s IBEX 35 index tumbled 3.41 per cent to stand at 7,895.5 points in afternoon trading, while in London the FTSE 100 index of top companies shed 1.19 per cent to 5,789.58.
Frankfurt’s DAX 30 lost 1.73 per cent to 7,295.92 points and in Paris the CAC 40 dived 2.29 per cent to 3,433.42. Milan and Lisbon each retreated by about 3.0 per cent in value.
Markets braced for a request by Spain for financial aid, after Spanish Prime Minister Mariano Rajoy told the Wall Street Journal that Spain would seek a full state bailout if its borrowing rates stayed at unsustainable levels.
“It can only be a matter of time before Spain is forced into a bailout request,” said Michael Hewson, senior analyst at CMC Markets trading group.
Spain has cut a deal with the European Union for a rescue loan of up to 100 billion euros (US$125 billion) for banks hobbled by bad loans extended before a 2008 property market crash.
But it has refused to be rushed into seeking a full-blown sovereign bailout until it knows the conditions. To avert such a rescue, Spain’s government was on Thursday set to unveil new cost-cutting measures.