The euro zone is looking decidedly less stable this morning as Spain's budget minister calls on Europe to shore up its debt-ridden banks—a move Spanish leaders had insisted just a week ago wouldn't be necessary. "What we need is for the European institutions to get going and seek that bank recapitalization through those procedures that mean more Europe," said Budget Minister Cristobal Montoro in an interview with Spanish network Onda Cero. The plea for help is an admission that Spain is being shut out of credit markets as borrowing costs soar for the troubled country. Already, financial watchers say the call for help will have an impact on how EU leaders manage the continent's debt problems as a whole.
What's wrong with Spain? The essential problem with Spain, which is still suffering the effects of a housing crisis, is it needs to refinance its debt but no one is confident enough in its banks. As The Wall Street Journal's David Roman reports, the matter became urgent "after Madrid was forced into a €19 billion ($23.75 billion) rescue of lender Bankia SA, while the government's borrowing costs have surged to record highs with yields on Spanish 10-year bonds staying above the 6 percent mark for the third straight week." Montoro explained in the radio interview, "Spain as a whole, has a problem when it comes to accessing markets, when we need to refinance our debt ... Spain doesn't have the market's door open, as such, the challenge is to open that door and regain the confidence of those markets, our creditors."