Market tensions returned with a bang yesterday as concerns about European public debt mounted. Truthfully, the concerns never went away, but sat dormant only to awake refreshed and ready to wreak havoc in peripheral Europe. This time, however, the focus of attention will not be Greece.
Nor will it be Portugal or Ireland. The focal point is centered this time on Spain, which was a target because of statements made by both government, banks and investors.
As proof of the doubts about Spain, the Secretary General of the Organization for Cooperation and Economic Development, Ángel Gurría, admitted in statements to the Swiss newspaper Handelszeitung that the next victims of the crisis could be Portugal and Spain.
In order to avoid that situation, incisive measures are necessary. "We have to build the mother of all firewalls. The bigger and more impressive it is, the slimmer the chance we'll need it." More specific, she quantified this barrier of protection by saying that a one billion-euro stability fund would suffice.
The blows hit hard
But the huge hit that Spain suffered yesterday in the financial markets was well-framed by Citi chief economist Willem Buiter: "Spain is the country that we are most focused on," he stated in an interview with Bloomberg. This warning, along with the statement from Ángel Gurría, aligns with other opinions that were voiced during the past several days.
