The euro has jumped against the dollar after European governments agreed to give Spain as much as 100 billion euros ($126 billion) to save its banking system, joining other members in the currency bloc to seek a rescue- Portugal, Ireland and Greece.
Spanish bank shares leapt almost six per cent on Monday morning on their first day of trade following the deal to recapitalise the country’s struggling lenders, with Madrid’s IBEX 35 benchmark index rising to 6,929.9 points in early morning trading, Al Jazeera reported.
London’s FTSE 100 index jumped 1.80 per cent to 5,532.92 points, Frankfurt’s DAX 30 rose 2.04 per cent to 6,255.65 points and in Paris the CAC 40 rose 1.98 per cent to 3,110.96 points as investors jumped into financial shares in the opening deals.
The move came after weeks of increasing concern that bad loans at Spain’s lenders might overwhelm public finances. The dollar and yen fell on decreased demand for refuge assets as shares rallied, according to Bloomberg.
The euro rose nearly one per cent to $1.26694 on Monday, its highest level since May 23, according to Reuters.
The rise comes after a bailout package was agreed at the weekend, which Spanish economy minister Luis de Guindos stressed that it was not a rescue but a loan that imposed restrictions only on the country’s banks.
Mariano Rajoy, the Spanish prime minister, said on Sunday that the eurozone deal had secured Spain a “line of credit” for the country’s debt-stricken banks that would ensure the “credibility of the euro”.
Olli Rehn, the EU Economic Affairs Commissioner, said the Spain deal was critical to reassure jittery markets.
Spain’s economy is twice the size of the other bailed-out countries combined.