Spain’s risk premium hits a new high for the year on banking concerns

Spain’s risk premium on Monday hit yet a new euro-era high as investors continued to digest the latest batch of government measures aimed at restoring confidence in the country’s lenders.

There was also contagion from Greece as investors started to contemplate the idea of a euro zone without the Hellenic country as the impasse among its political parties to form a coalition government after the May 7 elections showed few signs of being bridged.

The yield on the Spanish benchmark 10-year government bond at one point climbed to 6.3 percent, levels last seen in November of last year when it touched seven percent. That pushed the spread with the German equivalent to 492 basis points before it eased to 476 basis points in late trading, up 28 points on Friday’s close.

Before entering a euro-zone ministers meeting in Brussels, Economy Minister Luis de Guindos called for the “cooperation” of all members of the single-currency zone in overcoming the crisis. “We have done everything we needed to do from the standpoint of a new government that has been in power for four months and enjoys political stability,” De Guindos said. From now on, what we need is the cooperation of all of the euro zone. It has to be a joint response and I hope that tonight the Eurogroup will decide so.

“The basic thing here is to give a joint response, that Greece takes its decisions, that it achieves political stability as soon as possible, because undoubtedly this is going to have a positive impact on the euro zone as a whole,” he said.

The banks remained under heavy pressure, particularly Bankia, which was partly nationalized last week because of its heavy exposure to the ailing real estate sector.

The country’s main lenders started counting the cost of the increased provisions the government decreed they would have to make for possible losses on property assets.

The blue-chip Ibex 35 was down 2.66 percent at 6,809.40 points after having lost over 3 percent earlier on in the session. The other European bourses also suffered sizeable losses.

De Guindos declined to weigh in on whether or not Greece should remain in the euro zone. “I don’t want to talk about the possible exit of Greece from the euro; the only thing I’m going to say is that Greece has some commitments, independently of the government it has,” the minister said.

Events on the markets unfolded as the Spanish Treasury was obliged to raise the rates it offered at Monday’s tender of 12- and 18-month bills.