MEXICO CITY – The Foreign Minister of Germany, Guido Westerwelle, ruled out the possibility that Spain will require financial support from European Union’s bailout funds and said it is a strong country with a strong economy.
Westerwelle said on Sunday that “the Spanish government of Mariano Rajoy has shown great determination to implement reforms” and is therefore is optimistic about Spain, a statement featured on the German newspaper, Bild am Sonntag.
The minister, who is vacationing in Mallorca, noted that the German Government rejects the collectivization of European debt which would imply the creation of Eurobonds.
“To me, this is not negotiable. Eurobonds exacerbate the crisis, not ameliorate them,” he said.
However, the market will still closely watch the performance of Spanish bond yields next week.
A rise in costs paid by Spain and Italy and financed by the Union could shake financial markets. “Next week will be orientation week with Europe,” says omal Sri-Kumar, chief strategist at TCW. “There are more signs that Spain is directed to a full recovery.”
Yields on 10-year Spanish bonds crossed the 7% level last week, but fell below the same level on Friday. These rates are indications that European leaders may be forced to bail out Spain if their debt becomes unbearable.
With the absence of specific goals or meetings between European leaders, investors worldwide will be closely watching how the Spanish and Italian debt works out, evaluating the behavior of the European debt situation at the same time.
Nevertheless, it has been easy for investors – particularly Americans – to ignore clouds on the horizon, what with the three major stock indexes advancing more than 8% so far this year.
Even after Facebook, the Nasdaq was up more than 16% in 2012.
Last week, the shares had higher earnings. The Dow Jones industrial average rose 0.8%, while the S & P 500 and Nasdaq ended with an increase of 1%.
