The cost of borrowing for Spain rose sharply when the new conservative government sold “a shed load” of short-term debt on the financial markets just two days after winning a landslide victory in the country’s general election.
Spain raised 2.98 billion euros in an auction of three- and six-month bills, but at much higher yields than it has been used to paying.
The annualised rate of interest the country is paying on three-month bills has more than doubled from 2.29 per cent last month to 5.11 per cent. Six-month bills are up from 3.30 per cent to 5.23 per cent.
Analysts said the rise shows scepticism about the new government’s ability to fix the Spanish economy. Marc Ostwald of Monument Securities said: “This is not sustainable in the long run. 5.1 and 5.2 per cent for three- and six-month money when European Central Bank rates are 1.25 per cent – I think the term is ‘penal’.”
The centre-right Partido Popular won 186 seats in the 350-seat lower house of parliament with 44.62 per cent of the vote on a turnout of 71 per cent.
The Socialists, who had been in power since 2004, won 110 seats with 28.73 per cent of the vote – their worst election result since the restoration of democracy in 1975 after the death of the Falangist military dictator General Franco.
The pro-independence left-wing Basque party Amaiur won seven seats on the back of Eta’s decision to abandon its campaign of violence.
It was a personal triumph for Mariano Rajoy, the PP leader who, in seven years, had led his party to two electoral defeats. But he warned supporters outside party headquarters in central Madrid: “There won’t be any miracles. We never promised any. But we will stop being part of the problem and start being part of the solution.”
The economic crisis did for the government of outgoing Prime Minister José Luis Rodríguez Zapatero. The sovereign debt crisis – and slow growth and high unemployment – dominated the election campaign and, while it was not the fault of the Socialists, it was inevitable that the party in power would take a caning at the polls.
David Cameron called Mr Rajoy to congratulate him on his party’s performance and on what he called “winning a crucial argument at a vital time for Spain and Europe”.
The Prime Minister said he was looking forward to working closely with the new Spanish government.
