Fx currency trading saw the euro flop over the independent report commissioned by the Spanish government that showed a €53.75 billion fiscal hole, as opposed to the €62 billion initially estimated.
The study was commissioned to estimate how bad the damage years of reckless lending to building developers during the country’s boom years deepened Spain’s debt…
leaving the country awash with an unbearable debt, public protests and the prospect of a financial bailout that would certainly augment the country’s social problems.
The report, carried out by consultancy Oliver Wyman, lists seven banks that will certainly need bailout money or must raise further capital themselves by the middle of next year.
“The results of the Spanish financial solvency are an important step towards re-establishing trust in the Spanish financial system and should allow for the first round of recapitalization for November”, the European Commission informed on Friday.
Despite the positive audit report, in early afternoon fx currency trading the euro fell against the dollar for a second straight week on Friday, going down 0.4 percent at $1.2859, not far from Thursday’s two-week low of $1.2828.
“There is still a lot of questions regarding Spain, mainly related to whether or not it would seek a bailout”, said Brian Kim, currency strategist at RBS Securities in Stamford, Connecticut.
On Thursday, Madrid announced its 2013 budget, mainly based on spending cuts, something analysts see as a pre-condition for the much expected bail-out.
Neighbors France are also stirring fx currency trading with their own 2013 budget asking for an “unprecedented effort” to find €36.9bn in savings and taxing the superrich an astounding 75 percent.
However, the Socialist government sidestepped cuts in public spending, including pensions and state salaries.
As expected, the “supertax” has attracted a lot of criticism, especially of course, from the “superrich”. The climate of tension will surely have an effect in fx currency trading markets, as business leaders are claiming that the new measures will prevent France from attracting the cream of executives and drive the wealthy into tax exile.
Something the opposition is trying to get some political credit out of, with Marine Le Pen, president of the far-right Front National describing the budget as “an absurd hyper-austerity that will take France through the same way as Greece, Spain, Portugal and Ireland” , and Former agriculture minister Bruno Le Maire saying “France is going to the wall”.
Stateside, the Thomson Reuters/University of Michigan consumer perception index went down to 78.3 against the previous 79.2.