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Spain battles borrowing costs

Thursday, May 24, 2012 - 01:36

May 24 - Anti-austerity protestors round on Spain's government while investors demand more security on bonds and an audit on the fragile banking sector gets underway. Joanne Nicholson reports.

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Families who've lost their savings and investments gather in Madrid. They come in a week when Spanish borrowing costs have reached breaking point. This as the government is desperately trying to shore up its banking sector. These protestors listen to their spokesman outside the very bank the government has stepped in to rescue, at a cost of 9 billion euros. (SOUNDBITE) (Spanish) BANK CONSUMER GROUP ADICAE SPOKESMAN, ANTONIO PULIDO, SAYING: "We are here in front of Bankia'a head office to mark the week of protests against the massive sale of toxic financial products to families with the only objective of cleaning up their own balances." One in ten in Spain has an account with Bankia. Investors in the banking sector are now demanding record levels of risk premium on government bonds, taking them to levels thought to be unsustainable. A one month audit on the banks is underway to try and figure out how the sector would fair if the recession is prolonged. And while the banks comes under scrutiny, the labour unions are protesting against reforms, they say, will make it easier to fire people. (SOUNDBITE) (Spanish) 31 YEAR-OLD ACCOUNTANT, ESTER, SAYING: "I'm here because of the labour reform, everything our parents did is going to hell, that simple, and I think it's unfair." But the Spanish government is sticking with planned cuts it's hoped will save 45 billion euros and reduce the deficit from 8.9 percent of GDP to 5.3 percent this year. The Spanish regions have been warned government will intervene if the cost cutting measures aren't carried out. Joanne Nicholson, Reuters

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