With Spain now at the forefront of the euro-zone crisis, the Spanish stock market on Thursday plunged to close to its lowest level since the start of the global financial crisis in 2008, led by the banking sector. The blue-chip Ibex 35 ended the session below the psychologically important 7,000-point level for the first time since 2009.
The benchmark index declined 2.42 percent to 6,908.10 points, firmly establishing the doleful honor of being the worst-performing bourse in Europe this year. That was close to its low during the crisis sparked by the US subprime mortgage disaster and subsequent demise of Lehman Brothers of 6,817 points on March 9, 2009. The Ibex 35 has now shed 19.36 percent since the start of the year.
Spain’s risk premium rose 13 basis points to 423 basis points, but the Treasury still managed to pull off an auction of two- and 10-year bonds at reasonable rates.
Doubts are growing about the government’s ability to trim the budget deficit from 8.5 percent of GDP last year to 5.3 percent this year when the economy is forecast to shrink 1.7 percent. This has put a damper on the banks, which are the main holders of Spanish sovereign debt.
The banks, however, also have their own subprime hangover in the shape of their exposure to the property sector, which has been in a slough since the start of 2008. Fitch Ratings said Thursday that repossessed homes are currently worth half the valuation assigned to them when the mortgage was granted.
Santander shed 3.56 percent, while BBVA was off 4.52 percent.