Forex News, Fundamental Analysis Forex
October 22, 2012 @ 9:19 am

Euro rises as Spain bailout comes closer after Rajoy election majority

Spain held regional elections over the weekend, resulting in Prime Minister Mariano Rajoy winning a majority in his home region of Galicia, in the northeastern region of Spain.

Rajoy’s People’s Party was victorious over the Socialist party which lost almost half of their votes, while Rajoy’s party won 41 of the 75 seats in parliament.

By winning a majority of seats in parliament, this will make it easier for the Spanish prime minister to make a decision on requesting for a bailout from the EU. His regional election victory was an important “test” to pass, as voters showed their support for the mere ten-month old government. This comes amid tough austerity measures imposed by the government as hundreds of protestors take to the streets of Madrid to show their opposition to cuts and joblessness.

Sunday’s elections have given Rajoy a confidence boost and with a major obstacle removed, this has brought his government closer to requesting financial aid.

Speculation has been growing in the last week that the Spain will request financial aid, especially since Moody’s also refrained from downgrading Spain’s credit rating last week.

This has been helping drive down Spanish bond yields and has also supported the euro, lifting it to a month high last Wednesday. In early Monday trading euro was lifted, halting a sharp decline from Friday.

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