Bailout announcement fails to ease Spanish borrowing costs

According to international press, Spanish prime minister Mariano Rajoy has announced that G20 leaders have declared their support for Madrid's economic policies, despite an increase in Spain's borrowing costs.

The Wall Street Journal says Spain is waiting on the results of banking sector stress tests before formally requesting an EU bailout for its banking sector, as its financial industry struggles under the weight of real estate losses.

The Telegraph says that Madrid's borrowing costs have doubled after the Spanish government sold €3.39bn worth of 12- and 18-month bonds in its first debt auction since announcing it would be seeking a €100bn bailout from the EU.

The yield on the country's 10-year bonds reached the danger level of seven per cent last week, but rose high above that level yesterday, despite hopes that the results of the Greek elections would calm market fears, says the paper.

According to the FT, a bigger test of Madrid's financial situation comes tomorrow when the Spanish treasury plans to sell more medium-term bonds to finance its budget deficit, with few expecting the cost of Spain's debt to drop.

The paper says there are fears that the eurozone's fourth largest economy may need further EU assistance, with a full bailout predicted to cost in the region of €500bn, stretching the EU and IMF's resources.

The Guardian reports that German chancellor Angela Merkel is poised to allow the eurozone's €750bn bailout fund to buy up bonds from crisis-hit governments in a last-ditch attempt to drive down Spanish and Italian borrowing costs.

Germany had opposed the plan in the past, as it worried that it would be left footing the bill for other nations' profligacy, but Merkel has come under intense pressure as Spain's borrowing costs rose through the roof, says the paper.