Now debt-stricken Spain starts talks to get huge bailout

Spain has begun talks with eurozone leaders about a multi-billion euro bailout to prop up its economy.
In a move that will renew fears of a collapse of the single currency, Spanish officials have discussed an aid package for its sovereign debts from the eurozone’s trillion euro rescue fund.
The country has already received support to shore up the balance sheets of its banks.

Spanish Prime Minister Mariano Rajoy and government officials have begun talks with eurozone leaders about a multi-billion euro bailout

German Chancellor Angela Merkel has resisted calls to back eurobonds - which would let rich countries such as Germany underwrite debt of embattled countries

The news overshadowed crisis talks yesterday about the fate of Greece, which is seeking to slow the pace of the austerity programme put in place after it took two bailouts from the eurozone and the International Monetary Fund.
Senior government sources in London have revealed that world leaders have effectively done a deal behind the scenes to prevent Greece slipping out of the single currency before the US presidential elections in November.
Barack Obama is seeking re-election on November 6, and the Treasury believes that the White House will put pressure on Germany, France and other EU power brokers not to allow a Greek exit before then in order to prevent economic turmoil from derailing his chances.
‘President Obama would bring a pretty large amount of pressure to bear on Germany  if they tried to go before  the elections,’ said a senior government source.’ However, Treasury officials do not expect the crisis to be solved before the German elections in September 2013, condemning the world to another full year of financial instability.
German Chancellor Angela Merkel has resisted calls to back eurobonds – a mechanism that would let rich countries such as Germany underwrite the debts of the likes of Greece and other embattled nations.
But British officials believe she will be forced to create a grand coalition with the German opposition Social Democrats (SPD) after the next election and that plans for eurobonds could then be pushed through as the policy of a government of national unity.
Sigmar Gabriel, leader of the socialist SPD, said earlier this month that the party was prepared to accept collective debt liability if Germany is granted stricter budgetary oversight of Greece.

Senior government sources have suggested world leaders have agreed to prevent Greece quitting the euro before Barack Obama seeks re-election in November

Revelations that the Spanish may need a sovereign debt bailout will send jitters through the Treasury.
Chancellor George Osborne privately believes that the countries in the single currency have not yet done enough to put a firewall in place to prevent contagion spreading through Europe if a country like Greece leaves the euro.
The great fear is that a Greek exit would lead to a run on financial markets against Spain and Italy, whose economies are large enough to send Europe into a spiralling depression.
Three sources told the Reuters news agency yesterday that the Spanish government thinks it may need a bailout and has held informal talks on the issue in recent weeks. But no formal request has been lodged.
Yesterday Greek premier Antonis Samaras warned politicians in Europe who are happy to see the country leave the euro that such an event could trigger a domino effect throughout the 17-nation bloc using the single currency, forcing others out. He meets Mrs Merkel for talks in Berlin today.
Some German politicians have talked openly in recent weeks about the possibility of Greece leaving the euro. But Mr Samaras said ‘the consequences would be a catastrophe for Greece’.
It would mean five more years of recession and push unemployment above 40 per cent, leading to ‘economic collapse, social unrest and an unprecedented crisis of democracy’.