Spain gets a short term fix in euro bailout
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Jeremy Hobson: Global markets are way up this morning, so we’ll play the happy music when we do the numbers. But the reason for the jump, isn’t necessarily happy. European leaders agreed to bail out Spain’s banks to the tune of $125 billion over the weekend. Spanish banks were hemorrhaging cash ahead of this weekend’s crucial election in Greece — that could lead to a Greek exit from the euro.
The BBC’s Guy Hedgecoe is with us now from Madrid to explain. Good morning.
Guy Hedgecoe: Good morning.
Hobson: Well, this seems like something that has made the markets happy, but it does also seem like a band aid approach.
Hedgecoe: Well, that’s right. There has been a mixture of responses to Spain’s bailout. Certainly today as the markets have opened, the markets seem to be happy about it. The generally feeling seems to be that this is a short-term fix for Spain’s problems and the euro’s problems — and in that sense it could be a good thing. But, there has been criticism that in the long term, this could cause problems further down the road. It could increase, it will increase Spain’s debt burden. It’s not resolving necessarily the longer-term problems that Spain has.
Hobson: Now in other big bailouts in Europe, the country that got the money had to do a lot to get it. What did Spain have to do to get this money?
Hedgecoe: Well, Spain has already been undertaking quite a severe austerity program over the last five or six months in order to meet obligations laid out by the EU regarding its deficit. So, Spain is already undergoing quite a stringent program in that sense.
Hobson: Well, you’re in Madrid, and obviously that’s where the news of the day is, but I imagine that everyone’s focused on Athens and what happens this weekend.
Hedgecoe: That’s right, people in Spain have been looking very closely at the other bailed out countries — Portugal, Ireland, and Greece. But, in particular Greece, I think people have been following the situation there, perhaps wondering if what is happening in Greece could eventually happen in Spain. You know, I think a few months ago that would have been unthinkable, but as Spain’s financial problems have increased, I think Spaniards have become gloomier and gloomier about the prospects for their economy.
Hobson: The BBC’s Guy Hedgecoe in Madrid, thanks a lot.
Hedgecoe: It’s a pleasure.
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