Spain’s borrowing costs fall to less than half

Short-term financing costs for euro zone struggler Spain fell to less than half today, with banks taking up debt at an auction, and much of the purchasing power said to be coming from cut-rate money that would be lent by the European Central Bank.

The euro zone's debt dilemma continued to play in Greece, however, where borrowing costs were up at 4.68 per cent for just 3 months.

Demand for the 3- and 6-month Spanish Treasury bills remained high, with over €18 billion offered for €5.6 billion sold, which was above the targeted amount of €3.5 billion to €4.5 billion.

According to some analysts, it was another impressive auction from Spain as also an early Christmas present for the Treasury. They added that Spain was by no means out of the woods; the Spanish economy is still flat on its back and the country under threats of credit rating downgrades.

Economists say Spain was already in its second recession in three years and the sluggish economy and high deficit had put it at centre of the euro zone debt crisis. The main concern was that if it needed a bailout, it would stretch available funds and political will.

According to rating agency Fitch, a comprehensive solution to the euro zone debt crisis was beyond the region's reach and warned six of its economies, including Italy and Spain, could be hit with credit downgrades in the near future.

Meanwhile, Europe, in a bid to augment defences against the looming crisis, channeled €150 billion to the International Monetary Fund as the European Central Bank broadened its support for the flagging bond markets.