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Spain's debt hits record 7%

Thursday, June 14, 2012 - 01:32

June 14 - A day after ratings agency Moody's cut Spain's government debt rating, Spanish bond yields hit 7%, a level previously seen as unsustainable long-term. Economists say the country faces an uphill battle to avoid a sovereign bailout on top of the help for its banks. Joanna Partridge reports.

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Another blow for Spain's struggling economy. National newspapers reacted to credit ratings agency Moody's decision to cut Spain's government debt rating by three notches. That takes it to just above junk status. Given Spain's recession and high unemployment, many Spaniards are concerned about the ratings cut. SOUNDBITE: MADRID RESIDENT OSCAR CARO, ACCOUNTANT, SAYING (Spanish): "This was bound to happen and should've happened before." SOUNDBITE: MADRID RESIDENT CARMEN DE LA CUEVA, CIVIL SERVANT, SAYING (Spanish): "Let's hope it'll improve. But I think they do what they want without thinking about us." Economists say this latest cut makes it look more likely Spain will need a sovereign bailout, on top of the help it's getting for its banks. Peter Dixon is from Commerzbank. SOUNDBITE: PETER DIXON, GLOBAL FINANCIAL ECONOMIST AT COMMERZBANK, SAYING (English): "It falls hard on the heels of last week's downgrade by Fitch. So in that sense it's not such a big deal. But, you know, I think it does indicate that the ratings agencies are pushing Spain ever close towards the edge of that cliff." Shares in Madrid - and across Europe - briefly fell during morning trade as Spain's 10-year borrowing costs hit 7 percent. It's the first time Spain's yield has risen that high since joining the euro. That level was previously seen as unsustainable in the long-term - and led other countries to ask for financial rescues. This speculation about Madrid's finances comes as a source said an audit of Spain's banks showed they need between 60 and 70 billion euros to clean them up. Joanna Partridge, Reuters

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Spain's debt hits record 7%

Thursday, June 14, 2012 - 01:32