European officials travel to Washington this week seeking a larger global war chest to combat the two-year debt crisis as the Spanish government battles to quell renewed market turmoil over its finances.
Three weeks after European leaders unveiled emergency euro-area funding exceeding the symbolic $1 trillion mark, concerns about Spain’s position have ratcheted the nation’s borrowing costs to the highest levels this year. Crisis-fighting resources will dominate talks at the International Monetary Fund’s spring meeting in Washington from April 20-22.
European governments are banking on a bigger safety net to soothe markets as the crisis continues to simmer, with Spanish borrowing nearing the level that prompted Greece, Ireland and Portugal to seek bailouts. Sentiment will be gauged again on April 19, when Spain auctions two- and 10-year debt.
After spending or committing at least 386 billion euros to bailing out Greece, France and Ireland, Europe now has the money to fully finance Spain through the end of 2014 if needed, according to Schmieding at Berenberg Bank. Italy -- with a sovereign debt of 1.9 trillion euros -- is not so easily saved and would require the ECB to intervene if faced with an investor revolt, he said.