Spanish bailout boost to euro short-lived?

The European Central Bank unveiled a plan in September to buy the bonds of countries that ask for assistance, dragging Spanish yields down from unsustainable levels and driving the euro to its highest against the dollar since May.

But two months later, and with no sign of a move from Madrid, the wave of optimism that swept the market is fading and investors are again fretting about a potential lost opportunity.

The bond-buying plan was seen as a rare example of decisive action by policymakers to resolve the crisis and the delay in activating the programme has raised concerns they may once again put off painful steps that would be unpopular with voters.

In these circumstances, concern about the euro zone's underlying economic weakness, which was masked by the bond-buying plan, is again to the fore.

The danger with a request in future is it's more likely to come from a position of weakness when (Spanish) bond yields start to move higher, said Steve Barrow, head of G10 FX research at Standard Bank.

If Spain had made an immediate request when sentiment towards the euro was more positive we might have anticipated a better reaction.

Bond yields have risen across the euro zone periphery since mid-October, pushed higher by uncertainty over Spain and over whether Greece will secure the aid needed to stop it going bust.

The euro

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