Spain's borrowing costs rose to dangerously high levels Monday as finance ministers of the 17 countries that use the euro began to gather in Brussels to discuss terms of a rescue package for the country's stricken banks.
The interest rate,
or yield, on the country's 10-year bonds hit 7 percent Monday morning, a
level that market-watchers consider is unaffordable for a country to
raise money on the bond markets in the long term and the point at which
Greece, Ireland and Portugal all sought an international bailout. Stocks
on Madrid's benchmark index fell 1.7 percent. The yield later fell back
down to 6.99 percent.
The
yield indicates the interest rate a government would have to pay to
raise money from financial markets when it holds bond auctions. While
Spain can afford the high rates for a few weeks at least, it would find
them too expensive in the longer term.
Spanish
officials had originally indicated that it would decide on Monday how
much the country's troubled banks would get from a €100 billion ($124
billion) lifeline from other members of the 17-country eurozone.
Spain's bank industry has been struggling since 2008 under the weight
of toxic loans and assets following a collapse in the country's property
market.
But an official with
Spain' economy ministry said last week that the meeting of eurozone
finance ministers was not expected to generate a figure for how much
Spain would tap. Ministers planned to discuss terms of the loan and may
or may not finalize some of them at the evening session, said the
official, who spoke on condition of anonymity in keeping with policy.
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