Spanish short-term debt costs reach alarm levels

By Paul Day and Renee Maltezou, June 19 2012

A protester holds fake money next to a wall of sandbags built during a protest against financial speculations in front of Frankfurt's stock exchange June 17, 2012. REUTERS-Alex Domanski

(Reuters) – Spain lurched closer to becoming the largest euro zone country yet to be shut out of credit markets when it had to pay a euro era record price to sell short-term debt on Tuesday.

The soaring borrowing costs showed that a euro zone deal to lend Spain up to 100 billion euros ($126 billion) for its banks had not solved the country’s problems or restored investor confidence and suggests more aid may be needed fix its finances.

They also illustrated how Europe’s troubles run much deeper than Greece, brought back from the brink of default by Sunday’s parliamentary election that has cleared the way for a renegotiation of the terms of its bailout package.

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