Spain raises 5.640 bn euros in short-term debt

20th December 2011, Comments 0 comments

Spain raised 5.640 billion euros ($7.4 billion) in an auction of short-term debt on Tuesday, borrowing more money than first planned as it locked in sharply lower borrowing rates.

Spain had originally planned to sell 3.5-4.5 billion euros in three- and six-month bills in Tuesday's auction.

Rates fell dramatically from the previous comparable auction last month, a sign of easing market tension, and European stock markets and the euro rose firmly in response to this and strong confidence data from Germany.

Investors have shown concerns this year over Spain's debt because of doubts over its ability to repay borrowers at a time of bulging deficits and an economic slump that has created a 21.5-percent jobless rate.

A new conservative government takes power on Thursday after winning a November 20 election by a landslide on promises to cut the deficit and boost jobs.

In Tuesday's auction the borrowing rate on the three-month bills was down to 1.735 percent from 5.110 percent in the last sale. For the six-month bills, the rate fell to 2.435 percent from 5.227 percent.

Demand was very high, with investors bidding for 18.4 billion euros of bills in total, encouraging the Treasury to borrow more than the amount first planned -- as it had also done in the two previous debt auctions.

Spain has promised to slash its public deficit from 9.3 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.4 percent of GDP in 2012 and 3.0 percent of GDP -- the European Union limit -- in 2013.

In a speech on Monday ahead of his investiture, incoming prime minister Mariano Rajoy laid out his plans to create jobs, clean up banks and reassure investors that he can stabilise Spain's finances.

He said Spain would take measures to cut its deficit by 16.5 billion euros in 2012 but acknowledged that it may fail to meet the 6.0-percent deficit target this year.

© 2011 AFP

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