by Michael Tarsala
Market reaction to the Spanish bank bailout is none too positive in the Old World or the New.
In some ways, the moral hazards created has made the initial problem even worse, argues Michael Arold, manager of the Technical Swing investment model.
“Now you already have other countries asking, why didn’t we get these favorable lending conditions?”, Arold said. He says the deal increases the likelihood of Greece, Ireland and perhaps other indebted European nations to try to renegotiate austerity terms.
A quick checkdown of the concerns that remain:
— Traders seem focused on the fact that any bailout — no matter how it’s billed — is going to raise problematic debt-to-GDP ratios.
— Details of where the money is coming from are not clear.
— Some may be wondering if Italy may try the same types of hardball tactics used by Spain.
— Bank sentiment is still negative; Fitch Ratings cut Santander and BBVA’s ratings two notches after the bailout, and said it expects Spain to remain in recession through 2013.
