Credit crunch in Spain

Government bonds were sold off sharply as the Spanish Treasury secretary and a leading banker admitted companies and banks were having difficulties raising funds.

Francisco González, chairman of BBVA, Spain’s second-biggest lender, said: “For the majority of companies and Spanish financial firms, international capital markets are closed.”

Carlos Ocana, treasury secretary, said the credit freeze affecting Spanish banks and corporations was “definitely a problem”.

The article seems to blame this outcome on Spain's fiscal austerity drive; I'll note that's not the only possible interpretation of the data.  El Pais for instance suggests that not enough fiscal austerity has been forthcoming and they seem to be working with the same sources but with more detail.  In any case, markets are demanding something.  By the way, the Spaniards are planning a general strike for September; I'm sure the markets found that reassuring.  This German article, from FAZ, suggests that something will need to be done about Spain very soon.

P.O. O'Neill, by the way, has a good post comparing Spain and Ireland.