Spain pays up as contagion fears return

SPAIN (Financial Times) Spain’s short-term cost of borrowing rose sharply during a €4.6bn debt auction on Monday, casting fresh doubt on the recent claims that Europe’s fifth-largest economy had broken away from the concerns affecting the region’s troubled periphery. Amid mounting speculation about the possibility of Greek sovereign debt restructuring, and with investors nervously eyeing the electoral success of a eurosceptic party in the Finnish elections, Spain was forced to borrow at substantially higher levels in a sale of 12 and 18-month treasury bills.>

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Spain’s debt auction, held as the country prepared for the Easter holidays, comes after several months where the gap between its borrowing costs and those of Germany’s – seen by investors as the eurozone’s safest debt issuer – has narrowed, prompting some commentators to argue that the risk of Spain following Greece, Ireland and Portugal into a Brussels-led bail-out has receded. The International Monetary Fund last week said that Spain had “decoupled” from its peripheral eurozone peers, while the Spanish government itself has adopted an increasingly confident tone about the success of measures it has taken to trim the country’s budget deficit. (Read the whole story online in the Financial Times.)