Europe’s decision to provide Spain with as much as 100 billion euros ($125 billion) to rescue its banks has deepened the currency bloc’s crisis as it undermines confidence in the government’s ability to finance itself, JPMorgan Chase & Co. Strategist Daniel Morris said.
“When they went for the bailout, in some way you made it worse,” Morris said in an interview in Stockholm today. “Because if they couldn’t come up with the 100 billion euros for the banks, where are they going to come up with the 300 billion euros that they need over the next few years for their own funding?”
Yields on Spain’s 10-year government bonds have soared since the government’s June 9 announcement it had struck a deal with euro-area finance ministers to save the country’s banks. Spain’s 5.85 percent note due 2022 yielded 6.7 percent today, versus 6.22 percent on June 8, before the bailout was announced.
“They made that question” of government funding “more present than it actually was before,” Morris said.
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