Spanish bond yields surged the most this month as a second night of violent protests loomed amid sparring over the police response to clashes in Madrid.
Spain’s 10-year benchmark yield rose above 6 percent, approaching the levels seen before European Central Bank President Mario Draghi offered to buy struggling nations’ debt. Prime Minister Mariano Rajoy told the Wall Street Journal in comments confirmed by his office that he would “100 percent” seek a rescue if borrowing costs stayed “too high.”
Rajoy’s efforts to restore investor confidence suffered a new setback yesterday when Catalan President Artur Mas called early elections to push for “self-determination” for the country’s largest region. The move adds a new front to Rajoy’s battles as he seeks to persuade voters to accept the deepest budget cuts on record.
The slump in Spanish bonds sent the yield to as high as 6.04 percent today; it was at 6 percent at 1:15 p.m. in Madrid. The benchmark Ibex stock index slid 3.1 percent. That would be its biggest one-day loss in two months.
Thousands of protesters gathered around the Parliament in Madrid late yesterday to oppose budget cuts and tax increases Rajoy has pursued since coming to power in December in breach of his campaign pledges. The anarchist union CNT has called a demonstration for 7 p.m in Madrid today, coinciding with a general strike in Greece. Organizers urged allies today to join the march via Twitter and Facebook.
Opposition politicians accused the police of overreacting to the protests. Interior Minister Jorge Fernandez Diaz said the demonstration was an “illegal” effort to occupy Parliament. People’s Party deputy leader Maria Dolores de Cospedal compared the demonstration this week to an attempted coup in 1981 when civil guard officers stormed Parliament.
Socialist lawmaker Eduardo Madina said police used “excessive” force and Cayo Lara, head of the United Left party, called for an investigation into the police response as he said video images indicated police may have infiltrated the crowd. Officers acted “splendidly,” Diaz said.
Rajoy, who is in New York this week, is also facing criticism from European peers over his foot-dragging on whether to seek a bailout that would allow the ECB to buy the nation’s bonds. The premier, who is due to speak at 1 p.m. in New York, hasn’t responded to the protests or to the Catalan call for early elections except to express “respect” for the regional government.
“Spain is increasingly slipping out of his hands,” opposition leader Alfredo Perez Rubalcaba told reporters today. “There are clear fractures in Spain and the one I’m most worried about is social fracture.”