"There are growing fears that the Spanish economy is caught in a pernicious circle"
- Nicholas Spiro, managing director of Spiro Sovereign Strategy
Spain's efforts to calm investors with 10 billion euros in savings on education and health spending failed to stem concerns the nation may need additional capital if the economy weakens more than expected.
The yield on 10-year Spanish bonds in the secondary market rose as high as 5.978 percent Monday after Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation may need a bailout.
"There are growing fears that the Spanish economy is caught in a pernicious circle," said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.
"The weakness of government finances, the fragility of banks and worries about the scale of the recession all feed on each other."
"The government knows how to get through the current difficult situation," said Economy Minister Luis de Guindos.
European shares tumbled on Tuesday. The Stoxx Europe 600 Index lost 2.51 per cent to 252.57. Germany's DAX Index fell 2.49 per cent and France's CAC 40 Index erased 3.08 per cent. The U.K.'s FTSE 100 Index fell 2.24 per cent to 5,595.55.
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