Mounting speculation that Spain is prepping for a bailout begs the question – what happens to Italy?
Sources told Reuters Spain is considering freezing pensions and speeding up a planned rise in the retirement age as it races to cut spending and meet conditions of an expected international sovereign aid package.
Markets took this to mean it was preparing the ground for eventually asking for help. According to Lyn Graham-Taylor, fixed income strategist at Rabobank:
Spain is trying to front-run the reforms that would likely to be required as part of the (bond-buying) programme so that politically it’s more acceptable.
If Spain seeks aid, it could trigger European Central Bank bond-buying and many say this would improve the conditions in peripheral markets as a whole, including Italy.