Tags: Spain | clarity | EU | Aid

Economy Minister: Spain Has Time to Wait for Clarity on EU Aid

Sunday, 05 August 2012 09:31 AM

Spain has time to wait for clarity on what a full European rescue would involve as it has already covered the majority of its debt needs for the year, Economy Minister Luis de Guindos said in a newspaper interview published on Sunday.

"We will find out the details and then we will draw up a precise calendar," de Guindos said when asked by ABC newspaper if Spain would ask for aid in September. "We've got time ... the Treasury is financing itself relatively well in the market, given the circumstances."

Prime Minister Mariano Rajoy signaled for the first time on Friday that he may seek a full-blown aid package but said he had not yet made a decision on the matter. Spanish bonds surged after the comments on expectations aid would be forthcoming.

The European Central Bank said on Thursday it was preparing to buy Spanish and Italian bonds in order to reduce those countries' crippling borrowing costs but only after EU bailout funds were triggered and countries had asked for help.

Economy Minister de Guindos said the market was not performing normally.

"It's clear that this is an abnormally functioning market and when that happens, institutions must intervene. That is essentially what the ECB said last Thursday," he said.

A Reuters poll of nearly 50 economists found most expect the ECB to start buying Spanish and Italian bonds in September.

Ten-year Spanish government bond yields fell 30 basis points on the day on Friday but at 6.95 percent yields were still close to levels considered unsustainable. On the primary market, Spain easily sold 3.1 billion euros of debt on Thursday at yields well below recent peaks.

An aid request for Spain would involve negotiating terms with other euro zone countries and any package will come with a strict set of conditions.

Spain's program of spending cuts and reforms was enough to achieve budget deficit targets agreed with Brussels and the International Monetary Fund, and the European Commission and ECB had recognized Spain's efforts, de Guindos said.

"We have done our part," he added.

The Spanish government said on Friday it had submitted its budget plan for the next two years to the European Commission, in which it pledged to save 102 billion euros ($126 billion) by boosting revenue and spending cuts, including savings of 65 billion euros already announced on July 13.

Separately, de Guindos said the government would pass a law on August 24 putting into practice the conditions attached to an already-agreed European aid package of up to 100 billion euros to prop up Spain's ailing banks.

The law will lay out the working of the so-called 'bad bank', where state-rescued banks will park their toxic real estate assets and will dictate the role of the state-backed bank fund, the FROB, he said.

The new law will also outline how banks should sell complex financial instruments like preferential shares to retail investors, de Guindos said.

© 2020 Thomson/Reuters. All rights reserved.

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Sunday, 05 August 2012 09:31 AM
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