With Portugal heading back to an increasingly reluctant bond market, the BBC’s Europe editor, Gavin Hewitt, notes that “White knuckles have re-emerged in Brussels and other vulnerable European capitals.”
Sometimes in Brussels I detect that the fight is less to save Portugal but more to ring-fence Spain. It’s the fourth-largest economy in the eurozone. If it needed rescuing the funds currently are probably not there. And then awkward questions would have to be asked – including whether Germans, in those circumstances, would commit further treasure towards what would be a giant bail-out.
Spain has made progress in reducing its deficit. Its target for 2010 was to get its deficit down to 9.3%. It says it has done “somewhat better” than that. It also says it is on target to have the deficit down to 6% by 2011.
They are also hoping to benefit from the warm embrace of China. The Chinese have been buying up Spanish sovereign debt. They may well now hold 10% of Spain’s national debt.
(In a future blog I will examine China’s growing influence in Europe.) But even with Beijing’s actions the cost of servicing Spanish debt is rising.
Read the whole thing.