World stock markets plunge on Spain debt fears
World stock markets are plunging on new fears that Spain could need an international bailout.
Spanish economic minister Luis de Guindos ruled out the possibility Monday that Madrid would need assistance from its neighbors in the 17-nation euro currency zone. But Spain’s borrowing costs soared, and stock indexes in Asia, Europe and New York all fell sharply, down about 2 percent or more.
The interest rate on Spain’s government bonds pushed close to 7.5 percent, well above the 7 percent level at which Greece, Ireland and Portugal all needed financial rescues. The Spanish stock market fell sharply for the second straight day of trading.
De Guindos said financial markets were over-reacting to the financial plight of Spain, with the eurozone’s fourth largest economy. But the country is faced with high unemployment, economic contraction and new demands from its autonomous regions for aid from the central government. Europe has agreed to send up to $122 billion to rescue the country’s financially stressed banking system.
The value of the euro dropped to a new two-year low against the U.S. dollar, falling below $1.21.
(Photo: Edwin Pijpe/sxc.hu)