MADRID (AP) — Yields rose again Friday on Spanish bonds following a warning from the country's economy minister that the future of the euro will be determined in the next few weeks and will depend on the stability of Spain and Italy.
The interest rate on 10-year Spanish bonds stood at 6.52 percent in early trading, up 7 basis points from Thursday's close. The spread with the equivalent German bund was above 530 points.
Economy Minister Luis de Guindos said in a speech Thursday evening that Spain and Europe were at a crossroads as speculation mounts over whether the country will need a bailout. The danger is that Spain's 1 trillion-euro economy is bigger than those of already bailed-out Greece, Ireland and Portugal combined.
Spain's banking sector is laden with toxic assets and the government needs €19 billion to rescue just one lender, Bankia, SA at a time of recession and crushing unemployment of 24.4 percent.
"I don't know if we are on the edge of a cliff, but we are in a very, very difficult position," de Guindos said Thursday evening in a speech to business leaders in Sitges, a resort town near Barcelona.
He said Europe needs new mechanisms including one to allow bailout capital to be injected directly into troubled banks rather than go through governments first. It also needs a pan-European bank deposit insurance plan like the United States has. German opposes the idea
De Guindos also backed calls for a "banking union" with closer coordination among regulators of different euro zone countries.
'The future of the euro is going to play out in the next few weeks in Spain and Italy," de Guindos said. Bond yields — a direct measure of investor confidence in a country's debt — are also very high in Italy.
Spain's benchmark Ibex-35 stock index was up 0.56 percentage point.
The IMF Thursday denied a published report that it was already preparing a bailout for Spain.