Global markets rise with news of Spanish bank bailout; Burma declares state of emergency after violent clashes between Buddhists and Muslims in western Rakhine state; China's exports and imports up and inflation down; US threatens sanctions against "spoilers" to progress towards new Somali constitution and president; Russian police raid homes of opposition leaders; and more

Top of the Agenda: Global Markets Rise on News of Spanish Bank Bailout

Global financial markets rose on Monday, while the euro rallied against the dollar, following a weekend agreement by EU leaders to bail out Spain's faltering banking sector (DerSpiegel). Eurozone leaders agreed to lend Spain up to $125 billion for its bank rescue fund. It remains unclear whether the larger Spanish economy will require a bailout--along the lines of those implemented in Greece, Ireland, and Portugal--as a result of continuing sovereign debt pressures (WSJ).

Analysis

"How will the bailout affect Spain's ability to borrow in the markets? Cleaning up the banking system would be a positive step but it is not enough on its own. The country's economy is expected to shrink this year and the next. The bank bailout is unlikely to reverse the downward momentum, even if it eases the country's credit crunch. If Greece leaves the euro, it is possible that Spain will find itself shut out of the markets," says the Economist.

"Investors want to know whether there will be burden-sharing; joint equity in Europe's banks; a joint resolution authority; and deposit insurance. They want to know how these ideas will be organized, their legal status and how they interact with existing institutions. They want to know this so they can judge for themselves whether Spain can be saved or not," writes the Financial Times' Wolfgang Münchau.

"The rescue also amounts to a self-bailout for the rest of Europe ahead of Greece's June 17 election. The fear is that if Greece's Coalition of the Radical Left wins, the run on Spanish banks and national debt would accelerate and Madrid might have to seek a sovereign bailout. So Europe's leaders pressured Spanish leaders to take the bank bailout as a 'firewall' against more Greek contagion," says this Wall Street Journal editorial.

 

PACIFIC RIM

Burrma Declares State of Emergency

Burma President Thein Sein yesterday declared a state of emergency in western Rakhine state, where violent clashes between Buddhists and Muslims (NYT) have left at least seventeen people dead this month.

CHINA: Exports and imports were up (WSJ) 15.3 percent and 12.7 percent, respectively, for May, while inflation slowed, according to data released by the Chinese government over the weekend

 

ELSEWHERE:

US threatens sanctions against those who might interfere with new Somali constitution and president

Russian police raid homes of opposition leaders

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.