Europe shaken by fear Spain will need full bailout
By David McHugh, AP, Jul 23, 2012
FRANKFURT, Germany (AP)—Europe is on the brink again. The region’s debt crisis flared on Monday as fears intensified that Spain would be next in line for a government bailout.
A recession is deepening in Spain, the fourth-largest economy that uses the euro currency, and a growing number of its regional governments are seeking financial lifelines to make ends meet. The interest rate on Spanish government bonds soared in a sign of waning market confidence in the country’s ability to pay off its debts.
The prospect of bailing out Spain is worrisome for Europe because the potential cost far exceeds what’s available in existing emergency funds. Financial markets are also growing uneasy about Italy, another major European economy with large debts and a feeble economy.
Yet it is far more than Spain’s struggle that has unnerved markets.
Greece is still struggling with a mountain of debt and international creditors will visit the country Tuesday to check on the country’s attempts reform its economy. There is concern that officials from the European Commission, European Central Bank and the International Monetary Fund will find that that Greece is not living up to the terms of its bailouts and could withhold future funds.
Italy has also been caught up in fears that it may be pushed into asking for aid. Italy’s economy is stagnating and markets are worried that it may soon not be able to maintain its debt burden of (EURO)1.9 trillion ($2.32 trillion)—the biggest in the eurozone after Greece. Interest rates on Italy’s government bonds rose steeply Monday while its stock market dropped 2.76 percent.