Confidence in the bailout (or “victory for the Euro”) of Spain’s ailing banks does not appear to be very high as Spain’s borrowing costs have risen to the highest rate since the launch of the euro in 1999, with the benchmark 10-year bond yield hitting 6.81%.
Italy’s 10-year bond yield also rose, up to 6.28% and a rate not seen since January 2012.
These interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts. Factor in the downgrading by the ratings agency Fitch downgraded of the creditworthiness of 18 of the country’s banks and things in the garden are not looking too rosy at the moment.
On Monday, Fitch cut its ratings for two of Spain’s biggest banks, Santander and BBVA.
There are fears that Spain is just borrowing more and more money without doing anything about economic growth and that the proposed €100 billion bailout for the banks, already far higher than initial estimates, will be nowhere near enough.