Spain, the next country in the firing line of the EuroZone's debt crisis, with spendthrift regions and shaky banks threatening to torpedo state finances, and pushing funding costs towards levels that signal the need for a bailout.
The European Commission gave new help on Wednesday, offering direct aid from a EuroZone rescue fund to recapitalize Spanish banks and more time for Madrid to reduce its budget deficit.
That helped lower the risk premium investors demand to hold Spanish 10-yr debt rather than the German benchmark Thursday, but it remained close to the euro-era record, at 520 basis points.
Bank of Spain data showed a net 66.2-B Euros (US$82.0-B) was sent abroad in March, the most since records began in Y 1990. The figure compares to a EUR5.4-B net entry of funds during the same month one year ago.
Spaniards are worried about the health of their banks, hit by their exposure to a Y 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe.
Spain's Economy Minister Luis de Guindos said the data was more a reflection of the troubles of the banking sector to fund itself externally than deposits flying abroad.
The capital flight data predates the nationalization of Spain's fourth biggest lender Bankia (MC:BKIA) in May when it became clear the bank could not handle losses from bad real estate investments, compounded by a recession.
Spain's center-right government has contracted independent auditors to assess the health of its financial system in an effort to restore faith in its banks.
The prospect that Spain might not be able to handle losses at its banks has hammered shares and the Euro, although both regained some stability Thursday.
Mr. De Guindos said that the future of the euro would be at stake in the next few weeks in Spain and Italy, adding that the rumors that Spain was negotiating financial assistance with the International Monetary Fund were complete nonsense.
The battle of the Euro is being fought right now in Spain and Italy, he said at an event in the north-eastern region of Catalonia.
He also said Germany should help correct imbalances in the euro zone created by a loose monetary policy over the last 10 yrs, and by the non-respect by Berlin of the stability and growth pact in Y 2003.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.