Editor’s Note – Here in America our focus has been on the Islamic uprisings, the murder of our diplomats in Benghazi, our current campaign season and the economy here to name but a few. However, things continue to deteriorate in Europe, especially in Spain and Greece.
By Julien Toyer and Fiona Ortiz – Reuters
(Reuters) – Violent protests in Madrid and growing talk of secession in Catalonia are piling pressure on Spanish Prime Minister Mariano Rajoy as he moves closer to asking Europe for rescue money.
In public, Rajoy has been resisting calls from bankers at home and the leaders of France and Italy to move quickly to request assistance, but behind the scenes he is putting together the pieces to meet the stringent conditions for aid.
With protesters stepping up anti-austerity demonstrations, Rajoy presents painful economic reforms and a tough 2013 budget on Thursday, aiming to persuade euro zone partners and investors that Spain is doing its deficit-cutting homework despite a recession and 25 percent unemployment.
Figures released on Tuesday suggested Spain will miss its public deficit target of 6.3 percent of gross domestic product this year, and on Wednesday the central bank said the economy continued to contract sharply in the third quarter.
By pre-empting reforms demanded by Brussels — such as creating an independent fiscal auditor — Rajoy hopes to sell them to voters as home-grown rather than imposed from outside.
Diplomats reported intense last-minute pressure on Madrid on Wednesday from key euro zone policymakers to take tougher measures, notably on freezing pensions.
On Friday, Moody’s will publish its latest review of Spain’s credit rating, possibly downgrading the country’s debt to junk status.
On the same day, an independent audit of Spain’s banks will reveal how much money Madrid will need from a 100 billion euro ($130 billion) aid package that Europe has already approved for the banks.
A STEP CLOSER
Rajoy is gradually shedding his reluctance to seek a sovereign bailout for the euro zone’s fourth biggest economy – a condition for European Central Bank intervention to cut his country’s borrowing costs.
He suggested in an interview published on Wednesday that he would make the move if debt financing costs remained too high for too long.
“I can assure you 100 percent that I would ask for this bailout,” he told the Wall Street Journal, calling the situation he faces right now “fascinating”.
He also said he had not made his mind up on whether to maintain inflation indexation of pensions, which could cost the state an extra 6 billion euros this year.
“We need to be sufficiently flexible in order not to create any further problems,” he said when asked about pensions.
The interview, the central bank’s warning on the third quarter and other factors drove up Spain’s borrowing costs, with the yield on the benchmark 10-year bond jumping to 6 percent on Wednesday, a level seen as unsustainable in the medium term.
The blue-chip index of leading stocks fell 3.46 percent to a two-week low, with heavyweight banks BBVA and Santander leading the way.
Markets were also reacting to a letter from Germany, Finland and the Netherlands on Tuesday that implied that rescue funds Spain receives for its banks will remain on its public debt. The three said any future direct recapitalization of banks by the euro zone’s bailout fund should not cover “legacy” problems.
Read the rest here at Reuters on the following aspects of the troubles in Spain:
From My Fox NY
ATHENS, Greece (AP) - Violence has erupted in Greece after an anti-government rally in Athens that drew about 50,000 people.
Riot police used tear gas and pepper spray against several hundred demonstrators near the parliament. Protesters threw bottles and fire bombs and smashed paving stones and marble panels to toss at police. They also set fire to trees in the National Gardens.
Shopkeepers, teachers, customs workers and car mechanics were among those taking part in the march in central Athens, held during a general strike against new austerity measures. It’s the first large-scale walk-out since the country’s coalition government was formed in June.
The strike shut down Greece’s most famous tourist site, the Acropolis, and halted flights for hours. Ferry services were suspended, schools, shops and gas stations were closed and hospitals were functioning on emergency staff.
As the strike got under way today, the prime minister and finance minister worked out a package of nearly $15 billion in spending cuts. The country’s international lenders are demanding fiscal reforms before they make any more rescue payouts.