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Euro sees gains as markets greet Spain deal | Euro sees gains as markets greet Spain deal |
(about 3 hours later) | |
The euro has made gains against the dollar and the yen as markets react to the eurozone deal aimed at shoring up Spain's troubled banks. | The euro has made gains against the dollar and the yen as markets react to the eurozone deal aimed at shoring up Spain's troubled banks. |
In early Asian trading on Monday the euro bought $1.2671 and 100.73 yen, up from $1.2514 and 99.49 yen in New York on Friday. | |
Japan's, Hong Kong's and South Korea's main indexes all rose about 2%. | |
On Saturday, eurozone ministers agreed to lend Madrid up to 100bn euros ($125bn; £80bn) to help its banks. | On Saturday, eurozone ministers agreed to lend Madrid up to 100bn euros ($125bn; £80bn) to help its banks. |
Spanish PM Mariano Rajoy hailed the decision as a victory for the single currency. | Spanish PM Mariano Rajoy hailed the decision as a victory for the single currency. |
Correspondents say markets are reacting positively as the loan was larger than expected and has helped remove uncertainty over the crisis. | Correspondents say markets are reacting positively as the loan was larger than expected and has helped remove uncertainty over the crisis. |
It could also buy time for EU policymakers to work with other weak economies threatening the future of the 17-nation bloc, analysts say. | It could also buy time for EU policymakers to work with other weak economies threatening the future of the 17-nation bloc, analysts say. |
However, Stephen Davies from Javelin Wealth Management points out that it also shows "the degree of strain within the European banking system". | |
"It reflects the fairly dire strait within which Europe continues to find itself," he said. | |
Recession | Recession |
Spain's weakest banks were left with billions of euros worth of bad loans following the collapse of a property boom and the recession that followed. | Spain's weakest banks were left with billions of euros worth of bad loans following the collapse of a property boom and the recession that followed. |
The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due within a few days. | The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due within a few days. |
On Sunday, Mr Rajoy said that the rescue would speed up the flow of credit loans to families, to small and medium enterprises and to self-employed workers. | On Sunday, Mr Rajoy said that the rescue would speed up the flow of credit loans to families, to small and medium enterprises and to self-employed workers. |
He said the real winner was "the credibility of the euro". | He said the real winner was "the credibility of the euro". |
But he warned that the near future looked bleak, pointing out that the economy - in its second recession in three years - was still expected to shrink by 1.7% this year. | But he warned that the near future looked bleak, pointing out that the economy - in its second recession in three years - was still expected to shrink by 1.7% this year. |
"This year is going to be a bad one," he said. | "This year is going to be a bad one," he said. |
The loan to Spain was welcomed by the International Monetary Fund (IMF) as well as the US and Japan. | The loan to Spain was welcomed by the International Monetary Fund (IMF) as well as the US and Japan. |
EU economic affairs commissioner Olli Rehn said the deal was a clear signal to the markets that the euro area was ready to take decisive action to calm markets and contain contagion. | EU economic affairs commissioner Olli Rehn said the deal was a clear signal to the markets that the euro area was ready to take decisive action to calm markets and contain contagion. |
Spain is the eurozone's fourth-biggest economy - twice the size combined of those of Greece, Ireland and Portugal, the countries bailed out so far. | Spain is the eurozone's fourth-biggest economy - twice the size combined of those of Greece, Ireland and Portugal, the countries bailed out so far. |
However, tensions over the euro remain high with another election to be held in Greece next weekend. | However, tensions over the euro remain high with another election to be held in Greece next weekend. |
If voters elect a government that refuses to abide by the terms of the country's bailout deal, Athens faces a possible exit from the bloc. | If voters elect a government that refuses to abide by the terms of the country's bailout deal, Athens faces a possible exit from the bloc. |
There are fears that a Greek exit could trigger a run on the banks - not only there but in other eurozone countries. | There are fears that a Greek exit could trigger a run on the banks - not only there but in other eurozone countries. |
Greece has been in recession for five years, crippled by huge debts, high unemployment and labour unrest. | Greece has been in recession for five years, crippled by huge debts, high unemployment and labour unrest. |