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Markets drop as Spain continues to struggle

Published:  27 Sep at 10 AM

Spain’s ailing economy has caused stock markets across Europe to fall. A general strike and fears that Greece is on the verge of exiting the single currency has also helped stocks to drop. A report from the Bank of Spain confirms that the country’s economy continued to shrink during the third quarter.

Spain’s deepening recession and rocketing unemployment rate saw the Ibex index drop 3.9 per cent. Stock markets in Frankfurt, Paris in London also fell by 2 per cent. Shares in major banks across Europe have also seen dramatic losses. The UK’s RBS fell 5.5 percent, Deutsche Bank in Germany dropped 6.5 per cent and Credit Agricole in France lost 7.5 per cent.

Spain’s borrowing costs have risen above 6 per cent because of economic concerns. Louis de Guindos, Spain’s Economy Minister, said that for the three months ending in September, he expected a contraction of 0.4 per cent in the country’s economy.

The euro is also suffering and has dropped to its lowest level in a fortnight against the US dollar. It is now worth $.2858, a loss of 0.35 per cent. The Spanish authorities are currently attempting to slash the country’s deficit through tax rises and spending cuts which are proving extremely unpopular with its already stretched citizens.

If Spain looks for a financial bailout, then it will need to guarantee that it is capable of increased austerity which may be difficult for a country where a quarter of the available workforce is unemployed.