Spanish Pain Deepens

Spanish data this week will reveal the extent of damage wrought on the euro-area’s fourth-biggest economy as the government fights to cap a swelling deficit that is propelling the country toward requiring international aid.

Retail sales fell 11 percent in September from a year ago, the National Statistics Institute said today. Figures on public finances, consumer prices, and gross domestic product tomorrow may confirm a deteriorating economy and debt profile amid the toughest austerity in its democratic history. The Bank of Spain estimated last week that GDP fell for a fifth quarter.

The Spanish statistics onslaught will extend scrutiny by investors on the country after unemployment data last week showed a record with one in four workers jobless. The prospect of a worsening growth profile threatens to defy the government’s forecast for an easing in a slump that has now extended for five years, adding pressure on the country to apply for help.

“What we see now is that the economy is worsening,” said Yannick Naud, a London-based portfolio manager at Glendevon King Ltd. who helps oversee $163 million in assets. “We have seen a sharp reduction of the 10-year bond yield which is not warranted by the economic situation, it has only occurred because of the threat of intervention by the European Central Bank.”
Spanish Bonds

Bloomberg

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