Bailout

The Greek economy contracted sharply in the second quarter ... The national statics service Ellsta said Thursday that second-quarter gross domestic product fell 1.5% on a quarterly basis, weaker than forecasts of a 1% drop and the 0.8% fall in the first quarter.

Jobs data for May, meanwhile, revealed persistently high unemployment, which ticked higher to 12% from 11.9% in April.

Catalonia, which accounts for a fifth of Spanish gross domestic product, has been shut out of public bond markets since March and the extra yield it pays over national government debt has almost tripled this year. Galicia, in the northwest, has asked to freeze payments of debt it owes the central government and the Madrid region postponed a bond sale last month.

Spain?s regions, which borrowed at similar rates to the central government before the global credit crisis started in 2007, are key players in Zapatero?s drive to get his budget in order and push down the country?s borrowing costs. They control around twice as much spending as the state, employ more than half of all public workers and piled on debt during the recession.

Earlier this week, Ireland received European Commission approval for an additional ?10 billion ($13 billion) in capital for state-owned Anglo Irish Bank, on top of the ?14.3 billion the government has already injected into the bank. On Wednesday, Bank of Ireland, 36%-owned by the government, reported a pretax first-half loss nearly twice as big as its loss a year earlier.

The combination of events has made it more expensive for Ireland to borrow and driven the country's credit-default insurance costs 36% higher since the start of the month, to levels last seen just ahead of the European banking stress tests.

Full post as published by Calculated Risk on August 12, 2010 (boomark / email).