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Spain told bank aid will be supervised

Monday, June 11, 2012 - 02:25

June 11 - Financial market optimism over Spain's rescue package for its banks was short-lived, as investors and analysts asked for details about the bailout. EU and German officials say Spain faces supervision by international lenders, as Cyprus the next risk in the euro zone, hinted it would seek a bailout too. Joanna Partridge reports

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A baptism of fire. Luis Maria Linde is sworn in as the new Governor of the Bank of Spain, just as the country's banks are about to receive a financial rescue package of up to 100 billion euros. The markets were initially relieved, but investors' euphoria soon faded as they began to question the impact of the bailout. That pushed Spanish and Italian bond yields up again. Bondholders are now worried the rescue will only add to Spain's fast-rising debt. Following the bailout bounce analysts are questioning everything from the size of the loan to what conditions could be attached, says Josh Raymond from City Index. SOUNDBITE: Josh Raymond, Market Strategist, City Index, saying (English): "Whilst the bailout is absolutely necessary, it doesn't really fix anything in the long-term, it's almost like it's a plaster made out of banknotes essentially, whilst you need a much stronger fiscal surgery that's required both for banks and for the Spanish economy as a whole, because of course you've still got unemployment one in four. So from that perspective there are still a long of uncertainties regarding the mid to long-term picture." Spanish Prime Minister Mariano Rajoy had insisted the money for the country's banks came without political conditions. But on Monday EU and German officials said Madrid, like Greece, Ireland and Portugal, will be supervised by the "troika" of international lenders. It now looks like Spain might not be the only country to request a bailout this month. Cyprus, which is deeply exposed to Greece, strongly hinted that it may also apply for an international bailout for its banks and the state. Analysts say the deal struck by Spain could make other countries look to renegotiate their terms. James Hughes is from Alpari. SOUNDBITE: James Hughes, Senior Market Analyst, Alpari, saying (English): "What will Greece think of this bailout without the austerity measures? And you've also got stories coming up to this Greece election that some of these Greek parties are looking for ways to exploit the Spanish bailout for the Greeks and then, we've still got the issue that when we get to this Greece election and it comes out whichever way we think it's going to come out, we still have got exactly the same problems that Greece may not be there." Even if this bailout ends Spain's banking woes - the country is still in recession and struggling with austerity, high unemployment and high levels of debt. And that means many fear the money to rescue Spain's banks just won't be enough. Joanna Partridge, Reuters

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Spain told bank aid will be supervised

Monday, June 11, 2012 - 02:25