The Economist Oct 20th 2012 by The Economist

Author:The Economist
Language: eng
Format: mobi
Tags: News, The Economist
Publisher: The Economist
Published: 2012-10-20T04:58:10+00:00

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Austerity in Spain

Under pressure from all sides

More budget-cutting brings more protests against the government

IT IS a calm before the storm. As Mariano Rajoy, the prime minister, waits for regional elections in Galicia and the Basque country on October 21st, Spain is inching towards asking for a “soft” bail-out. But officials insist no formal request is imminent. Markets are calm, but watchful. Although Standard & Poor’s, a rating agency, has downgraded Spain to close to junk, yields on ten-year debt have fallen to a six-month low of under 5.5%. Some say a request for help that unleashes unlimited bond-buying by the European Central Bank (ECB) would cut another 1.5 percentage points, making Spain’s borrowing costs manageable. Indeed, they could fall so low that the bail-out credit line became redundant and the ECB would not even need to buy bonds: officials talk of a “virtual” rescue.

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