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| Version 0 | Version 1 |
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| Spain fears prompt new rise in bond yields | Spain fears prompt new rise in bond yields |
| (40 minutes later) | |
| The difference between the cost of Spanish and German bonds has hit a new record on fears about Spain's debt. | The difference between the cost of Spanish and German bonds has hit a new record on fears about Spain's debt. |
| German government bond yields fell to 1.34%, while Spain's rose 0.07 percentage points to 6.55%. | German government bond yields fell to 1.34%, while Spain's rose 0.07 percentage points to 6.55%. |
| Yields reflect how much investors demand in return for holding a bond, with a higher yield an indication of the perceived risk. | Yields reflect how much investors demand in return for holding a bond, with a higher yield an indication of the perceived risk. |
| European stock markets were also unsettled, opening with falls of more than 1%. | European stock markets were also unsettled, opening with falls of more than 1%. |
| Spain's economy has become the focus of investor concern. | |
| Italian bond yields also rose above 6% ahead of a new bond issue by the Italian government. | Italian bond yields also rose above 6% ahead of a new bond issue by the Italian government. |
| Tax warning | |
| On Friday, Spanish bank Bankia, which was formed from the merger of several struggling regional lenders, asked for a 19bn-euro bailout, a much larger amount than had been expected. | |
| Spain's property boom and bust has left its banking sector very weak, and with unemployment among the highest in the eurozone the country is struggling to raise enough in taxes to fund spending. | |
| With Spain's borrowing costs and banking system close to breaking point, the European Commission is in a bind. | |
| As guardian of the budget rules it is now nursing a clear analysis of what each member state must do to balance austerity measures with a dash of growth on the side. | |
| But a handful of countries, notably Spain and Italy and the bailout countries of Greece, Ireland and Portugal are under minute scrutiny. | |
| The commission knows that going public on wayward members' latest failings could act like another negative report from the rating agencies - helping tip them even closer to the financial edge. | |
| With the new French president Francoise Hollande pushing for more growth measures, it's likely the commission will put more emphasis on earmarking spending to create jobs. | |
| But what the worst-affected southern Mediterranean countries really need at this very moment is not lectures but large sums to shore up their banking systems - cash which neither the EU collectively or its central bank is able to lend them. | |
| The Bank of Spain's governor, Miguel Angel Fernandez Ordonez, said on Wednesday that the Spanish government's estimates for tax income this year could fall short and spending could be higher than expected. | |
| The governor, who said he would resign a month earlier than scheduled, said if the government's deficit-cutting plans went off course this year it should bring forward a rise in VAT which is planned for 2013. | |
| Growth guidance | Growth guidance |
| Later on Wednesday, the European Commission will give its member countries advice to help them meet growth targets. | Later on Wednesday, the European Commission will give its member countries advice to help them meet growth targets. |
| It will be the second annual set of recommendations, which are designed to guide members' economic policies for the coming year. | It will be the second annual set of recommendations, which are designed to guide members' economic policies for the coming year. |
| The guidance uses the EU's growth strategy (called Europe 2020) as its starting point. | The guidance uses the EU's growth strategy (called Europe 2020) as its starting point. |
| The country-specific recommendations (CSRs) will include in-depth reviews of the economies of 12 of the 27 member countries, including the UK's. | The country-specific recommendations (CSRs) will include in-depth reviews of the economies of 12 of the 27 member countries, including the UK's. |
| Last week, the International Monetary Fund (IMF) said the UK's continuing economic weakness meant authorities should consider more quantitative easing and even cutting interest rates. | Last week, the International Monetary Fund (IMF) said the UK's continuing economic weakness meant authorities should consider more quantitative easing and even cutting interest rates. |
| Its annual look at the UK economy endorsed the government's deficit cutting plan, saying it was essential, but added that if growth failed to pick up, the government would have to consider delaying cuts. | Its annual look at the UK economy endorsed the government's deficit cutting plan, saying it was essential, but added that if growth failed to pick up, the government would have to consider delaying cuts. |
| The IMF also stressed the risks to the UK of the eurozone crisis. | The IMF also stressed the risks to the UK of the eurozone crisis. |