Premier: Report Spain Wants $364 Billion in Aid Is 'Madness'

Tuesday, 04 May 2010 11:50 AM

Spanish Prime Minister Jose Luis Rodriguez Zapatero on Tuesday dismissed as "complete madness" a market rumor that his country would soon ask for 280 billion euros ($364 billion) in aid from the euro zone.

He also told a news conference in Brussels that such rumors could damage Spain's interests and that this would be "intolerable" and Spain would fight them.

"I was told something about that rumor and the truth is I give it no credit, it is complete madness," he told journalists.

"These rumors can increase differences and hurt the interests of our country, which is simply intolerable and of course we intend to fight it," he said.

Spanish markets slumped on Tuesday on concerns of spreading contagion from Greece to other indebted euro zone countries.

Zapatero said Spain has much lower debt levels than most EU countries.

He said he had confidence in Spain's public accounts and it was strongly solvent, but his country had to restructure its financial sector as soon as possible, referring to Spain's regional savings banks.

Zapatero, whose country holds the rotating European Union presidency, said euro zone leaders will give their definitive support for emergency loans to Greece at a summit on Friday.

Fitch Ratings reiterated its credit rating on Spain as 'AAA' with a stable outlook Tuesday.

"That's the rating we have on them with all that implies," a spokesman at the credit rating agency in London told Reuters.

Credit rating agency Standard & Poor's last week cut its ratings on Spain's sovereign debt to AA, saying a longer-than-expected period of low growth could undermine efforts to cut the budget deficit.

Fitch sovereign analyst Brian Coulton told Reuters on April 28 the fiscal adjustment program put in place by the government was a strong one with measures which seemed credible, although he cited the economy's performance as a medium term risk.

Spain's Socialist government has promised to cut its budget deficit from 11.2 percent of gross domestic product in 2009 to the EU limit of 3 percent by 2013 with measures including a hike in value added tax and a freeze on civil servants' pay.

The Spanish stock market fell 2.8 percent on Tuesday on euro zone sovereign risk concerns. The premium investors demand to hold peripheral euro zone government bonds rose and the cost of insuring against defaults was higher as worries remained over a bailout plan for Greece and fears of contagion to other issuers.

© 2015 Thomson/Reuters. All rights reserved.

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