Spain's debt costs break 7% level

Spain’s borrowing costs have broken through the level where its debt is seen as unsustainable, despite the victory by pro-bailout parties in the Greek elections.

Financial data provider FactSet said the interest rate on Spain’s 10-year bonds - an indicator of market confidence in how well a country can pay down its debt - stood at 7.02%.

That marked a rise of nearly 15 points for the day, in which the yield had initially fallen. Stocks were down 1.5 points.

The Greek results seemed to provide a respite as trading began. Fears of an abrupt Greek exit seemed to ease, and with them concerns that contagion from what could have been a definitive new chapter of the euro crisis would spread to Spain.

Spain has already requested a bailout for its banking sector, saddled with billions in toxic assets after the implosion of a property bubble. Just how much it will tap from a €100bn fund will be announced this week after two independent auditors present the results of tests they are carrying out.

The real fear was that Spain would need a full-blown bailout – enough money to keep the government running, as is the case in Greece, Ireland and Portugal. The problem is that Spain’s €1.1tn economy is bigger than those of the other three altogether.

Spain’s public finances are bearing the twin strains of recession, with a 24.4% jobless rate and shrinking GDP, and economy-draining austerity measured ordered to try to get the deficit down to EU-mandated levels.