If it’s Thursday, it must be Madrid. After Italy’s encounter with soaring borrowing costs last week, it is now Spain’s turn. An auction of 10-year government bonds went badly on Thursday; the authorities were forced to pay a whisker under 7 per cent, the level above which the word “bail-out” gets whispered. It means that Spain’s borrowing costs are 150 basis points higher today than a month ago. Spain’s predicament is different from Italy’s. Yet investors no longer differentiate between them.

In some respects, Spain is in a healthier position than Italy. It is not subverting its democratic system by resorting to a stopgap technocratic government. A general election on Sunday should see the Socialists lose and a new conservative government take over, ensuring political stability. Spain’s debt position is stronger, too. Whereas Italy’s total sovereign debt is 120 per cent of gross domestic product, in Spain it will be no more than 80 per cent in 2013 – the same as France and Germany. Nor is it facing any large bond redemptions until next April, according to Capital Economics. So its financing position is broadly secure.

Spain lacks Italy’s vast private wealth resources, however: private sector debt ballooned during the boom. Now Spanish consumers have stopped spending, and the economy stagnated in the third quarter. Some progress has been made in reducing its fiscal deficit, but Spain will probably miss its 6 per cent target for this year; the only question is by how much. With austerity set to endure, the new government will need to balance its fiscal adjustment aims with the imperative of not pushing the country into another recession. Achieving reform of labour practices and regional spending should ensure a more sustainable turnround. Spain should maintain the momentum of reform to keep the markets off its back – and avoid being mistaken for Italy.