The big story in the news this weekend was Spain officially requested a $125 billion bailout to rescue its banks. As recently as May 28th Spain’s Prime Minister, Mariano Rajoy, had said Spain would not need to request the bailout. With the $125 billion bank bailout all but guaranteed from European finance ministers, the bigger question is will Spain itself need a bailout? I believe they will, but it is unclear where the huge sum of money that would be needed to bail the country out would come from.
For more on Spain’s request click here: Spain seeks Euro bailout…
Here in the U.S., the Dow (a stock market index) was up over 280 points this past Wednesday on expectations the Federal Reserve would extend its current Treasury bond buying program(called Operation Twist). Currently there is a tug-of-war occurring between bad news out of Europe and any news of government intervention in the U.S. or abroad.
The stock market has tended to rally on even a hint of government intervention even though to this point intervention has not solved the crisis.
I would not be upset if I never had to write about Greece again but it is worth mentioning that they are having elections again this Sunday. The elections will determine whether or not they will implement the austerity measures (read: cut the level of government spending) that was required in return for their country to be bailed out by the European Union.
This story will be a key driver of stock and bond markets this week.