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Relief is short lived

Relief is short lived

Just as the eurozone caught its breath from the Greek election result, the market’s focus rotated to Spain where borrowing costs surged to an unsustainable level. Spanish 10-year bond yields hit a euro-era high of 7.13% as investors feared Spain may become the fourth euro member to need a bailout, despite the recent recapitalisation of its banks. The stresses in Spain also bring attention to other large, financially challenged euozone members, like Italy where bond yields rose above 6.0%.

With the elections in Greece failing to dampen the threat of contagion in the eurozone, world leaders at the G20 summit are piling pressure on Europe to outline a definitive strategy to save the euro and end the financial crisis. G20 leaders will be expecting plans to outline further financial, fiscal and political unity to strengthen the region and create relief in the financial markets.

The G20 summit also saw the International Monetary Fund raise its lending capacity to help protect the world economy from the fall-out of the eurozone debt crisis. Emerging countries boosted their pledges to the IMF’s global firewall, nearly doubling the fund’s resources to $456bn.

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