Senin, 11 Juni 2012

Cyprus next for bailout as eurozone crisis deepens

Cyprus next for bailout as eurozone crisis deepens

By Hugo Duncan

PUBLISHED: 16:12 EST, 11 June 2012 | UPDATED: 16:12 EST, 11 June 2012

Italy and Cyprus were in the firing line last night as the £80billion bailout of the Spanish banking system failed to stem the crisis in the eurozone.

Spain became the fourth country in the single currency bloc to request international aid in a desperate bid to prop up its troubled lenders.

But early euphoria on the financial markets evaporated as investors fretted about the details of a Spanish rescue and which country would be next to need support.

Short lived: Early euphoria on the financial markets evaporated

Short lived: Early euphoria on the financial markets evaporated

The FTSE 100 index surrendered a 100-point rally to close down 2.71 points at 5432.37 and the euro went into reverse on a rollercoaster session for investors.

Kathleen Brooks, an analyst at Forex.com, said: ‘Throughout this crisis Europe’s periphery has been personified as a pack of dominos â€" if one falls then others will follow. So now the attention turns to the next domino.’

Cyprus, which is heavily exposed to Greece, hinted that it may need a bailout by the end of the month â€" both for its banks and the country as a whole.

‘The issue is urgent,’ said finance minister Vassos Shiarly. ‘We know the recapitalisation of the banks must be completed by June 30 and there are only a few days left.’

It is feared that Cyprus may be followed by Italy and the country’s borrowing costs soared as the crisis threatened to spread to Rome.

Italy’s 10-year bond yield â€" the interest rate the government pays to borrow â€" rose back above 6 per cent towards the levels that triggered bailouts in Greece, Ireland, Portugal and Spain.

Official figures in Italy showed the economy shrank 0.8pc in the first three months of the 2012 â€" the sharpest decline for three years.

The Spanish 10-year bond yield hit 6.5 per cent on concerns about how much the bailout will add to the country’s debt and the lack of a plan to kick-start growth.

‘The EU is selling this as a great victory but when you look at the details, this is a loan, and we don’t know yet where the money is coming from,’ said Steen Jakobsen, chief economist at Saxo Bank in Copenhagen.

‘At the end of the day, it will increase Spain’s debt no matter what they say.’

Greek elections on Sunday could plunge the eurozone deeper into crisis if angry voters back radical left-wing parties opposed to austerity â€" pushing Athens closer to an exit from the euro.

The terms of the Spanish bailout â€" widely seen as less onerous than for other countries â€" could also trigger demands for earlier rescues to be renegotiated.

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