Market Overview

Rajoy to Unveil Spain's 2013 Budget Amid Euro Decline


The euro continues to steadily decline against the U.S. dollar, closing the market Wednesday at 1.2874.

According to CNBC, prices were expected to rise Thursday morning in anticipation of Prime Minister Mariano Rajoy's unveiling of Spain's 2013 budget. Amid violent protests, Rajoy is expected to ask for an international bailout between 60 and 100 billion Euros as well as implement major budget cuts. Rajoy has implied that he would ask for the bailout if Spanish bond yields were too high for a long period of time.

Spanish 10-year bonds reached above six percent Wednesday and are expected to continually rise as investors wait for Rajoy's plea for help. The result of an audit of Spanish banks also weighs heavy on the value of the euro, as many expect to find almost a 60 billion euro deficit.

Spanish protests only further investor doubts, as many believe Rajoy doesn't have the gall to make unpopular cuts. While he has urged Spaniards to look to the future and ignore temporary losses, anti-austerity protesters have turned violent. With violent protests mounting yesterday in Athens, Greece over the latest budget cuts, many wonder if Spain is headed for the same fate.

Rajoy's budget plan announcement comes as a last-ditch effort to save a failing economy without following a reform program dictated by European Union authorities. Eurozone partners like Germany and Finland released statements this week that indicated Spain and Ireland would be held accountable for billions of euros they've already borrowed to bail out their banks earlier in 2012, furthering concern that Rajoy's austerity plan may not satisfy the EU.

Italy also looks to sell seven billion euros worth of debt Thursday, which could help bolster confidence. According to Reuters, all eyes were to be on Spain Thursday, whose volatility could scare most off.


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Posted-In: Athens Greece Mariano RajoyNews Bonds Forex Global Markets

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