Debt crisis: ECB last hope as dam breaks in Spain

Spain's borrowing costs have surged to record highs and are perilously close to the point of no return, threatening a full-blown sovereign crisis unless the European Central Bank comes to the rescue. 

"We're facing maximum tension. The situation is unsustainable over time," said the country's finance minister Luis de Guindos. Yields on 10-year Spanish bonds yields punched to almost 7pc, above levels that triggered ECB intervention to back stop Spain last November.

"The ECB needs to intervene very quickly or it is game over," said Nicholas Spiro from Spiro Asset Management. "There is a whiff of capitulation in the air."

The dramatic escalation comes just days after the eurozone agreed a €100bn rescue package for the Spanish state to recapitalise its crippled banks. "It is very worrying. Markets are behaving as if the eurozone is heading for break-up," said Jens Sondergaard from the Japanese bank Nomura.

France's industry minister Arnaud Montebourg said the markets were flying out of control because the ECB was failing to take charge. "We need an ECB that does its job," he said.

In an astonishing outburst for a French minister, he lashed out at German Chancellor Angela Merkel and the "German right" for driving much of Europe into slump. "Certain European leaders, led by Mrs Merkel, are fixated by blind ideology."

Read more: http://www.telegraph.co.uk/finance/financialcrisis/9332663/Debt-crisis-ECB-last-hope-as-dam-breaks-in-Spain.html