23.07.2012
By Simon Miller
Fears are growing that Spain will need a full sovereign bailout as the country's crisis deepened this morning.
Average ten-year bond yield rates hit 7.5% this morning raising concern that the country is being pulled deeper into a debt crisis.
Despite the eurogroup agreeing to a bank bailout package of up to €100bn on Friday, the increasing cost of Spain's debt could see it asking for a direct bailout of up to €500bn as the debt market shuts on the country.
Concerns increased after Murcia was reported to become the second region to look for help from central government with at least six more also considering following in Valencia's footsteps when it became the first area to seek government assistance.
On Friday, the Spanish government also cut its economic forecast for 2013 with the country expected to stay in recessions after a 1.5% contraction in 2012.
Markets reacted badly to with the FTSE 100 currently down 92.92 at 5,558.85, while the Euro Stoxx 50 at 2,196.3, down 41.03 and the CAC 40 dropping 1.63% at 3,141.89 (09.36BST).
Spain's Ibex 35 was down 4.1% at 5,964.90 while the euro also fell, currently trading at 0.7775 to the pound and 1.2092 against the dollar.
Spain's ten-year yield is currently trading at 7.51700.
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