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Germany, France Say Markets Are Overreacting to Spain Concerns

April 11, 2012

The governments of Germany and France said investors are overreacting to concerns over Spain’s ability to narrow its budget deficit.

The Spanish government has undertaken a “comprehensive reform” of its finances, labor market and banking system, German Finance Ministry spokesman Johannes Blankenheim said today. French government spokeswoman Valerie Pecresse said that market concern over Spain is “excessive.”

“We regret that markets have not yet sufficiently recognized these enormous reform efforts,” Blankenheim told reporters in Berlin. “These reforms need time to take effect, so what the Spanish government is undertaking is very promising.”

Investor concern that Spanish Prime Minister Mariano Rajoy will fail to revive his country’s economy and compound the debt crisis has sent Spanish 10-year borrowing costs to their highest levels so far this year. European Central Bank Executive Board member Benoit Coeure suggested today that policy makers might intervene over the higher yields by reviving the central bank’s bond-purchase program.

Spain’s 10-year bond yield rose as high as 6.02 percent today, the most since December, before easing to 5.84 percent as of 11:50 a.m. in Madrid. Borrowing costs had tumbled from a November peak approaching 7 percent after the ECB offered euro- area banks three-year loans, calming markets.

“The yields on Spanish bonds have risen significantly recently, but they still remain below their highs from last November,” Blankenheim said.

To contact the reporters on this story: Patrick Donahue in Berlin at; Gregory Viscusi in Paris at

To contact the editor responsible for this story: James Hertling at

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