Spain over; is Cyprus up next in Europe’s economic contagion? | business | Hindustan Times
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Spain over; is Cyprus up next in Europe’s economic contagion?

Financial market euphoria over a European bailout for Spain’s debt-stricken banks faded quickly on Monday as investors sounded the alarm over its impact on public debt and bondholders, and eyed the next risks in the euro zone’s debt crisis.

business Updated: Jun 11, 2012 21:02 IST

Financial market euphoria over a European bailout for Spain’s debt-stricken banks faded quickly on Monday as investors sounded the alarm over its impact on public debt and bondholders, and eyed the next risks in the euro zone’s debt crisis.


EU and German officials said Spain faces supervision by international lenders after the deal to lend Madrid up to 100 billion euros ($125 billion), contradicting Prime Minister Mariano Rajoy who insisted the cash came without such strings.

European stocks leapt to a four-week high, with investors scooping up battered financial shares. But Spanish and Italian bond yields rose sharply as doubts set in about the impact and terms of the deal, designed to avert a run on Spanish banks.

Cyprus, which is deeply exposed to Greece, strongly hinted on Monday that it may apply for an international bailout before the end of this month, both for its banks and for the state. It would be the fifth member of the 17-nation euro area to require assistance since the debt crisis erupted in Greece in late 2009. The European Commission’s top economic official, Olli Rehn, said the pre-emptive action to support Spain “is critical for calming down market turbulence in Europe.