Spanish rescue draws closer as Cyprus buckles

Spain’s ruling party has begun to crack under pressure, signalling for the first time that the country may need a European rescue to shore up its banking system.

“A bail-out would not be the apocalypse,” said José María Beneyto, foreign affairs spokesman in Spain’s parliament. “You have to live with it. We have got to escape this or we’ll go mad worrying about bonds spreads.”

Mr Benyeto accepted that it would mean cuts in salaries and pensions dictated by a Troika from the EU, the European Central Bank and the International Monetary Fund. “Portugal is living with it relatively passively, and Ireland, too,” he said.
The shift came as Cyprus edged closer to a bail-out after President Demetris Christofias said his country had been engulfed by large exposure to Greece. “I don’t want to absolutely exclude it,” he said.

Russia has effectively shored up Cyprus over the past two years but rising defaults in Greece have proved overwhelming. The Cypriot banking system is nine times the country’s GDP, with assets of €157bn (£127bn). It has been called the “Iceland” of the South.

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