Spain, deflecting pressure to spell out whether it needs more European financial support, told eurozone finance ministers yesterday it will set clear deadlines for structural economic reforms by the end of the month.
Madrid’s borrowing costs have fallen sharply since the European Central Bank said it was ready to buy Spanish bonds but big borrowing needs before the year-end and a deepening recession mean most analysts and policymakers believe it only a matter of time before it will require help.
“We will adopt a new set of reforms to boost growth... It will be in line with the recommendations of the European Commission,” Economy Minister Luis de Guindos told journalists after meeting his peers in Cyprus. A detailed timeline would be attached.
However in Madrid, Deputy Prime Minister Soraya Saenz de Santamaria said the Cabinet would simply issue a new calendar on September 28 for enacting reforms announced in July.
Her comment appeared to undercut De Guindos’ pledge in another example of communications problems that have dogged Spain’s Government.
The timing suggests a request for aid may not be far away, although de Guindos insisted the package was unrelated to any possible bailout terms. Several eurozone officials have speculated Spain could apply in time for the next meeting of eurozone finance ministers on October 8.
Madrid has so far resisted austerity conditions that go beyond the EU policy recommendations it is already implementing, while north European creditors led by Germany are adamant that any aid would come on tougher terms.
The ECB has said a request for help from the eurozone’s bailout fund, and the negotiation of strict, time-bound policy conditions and monitoring, is essential to trigger its bond-buying intervention in the secondary market.
ECB President Mario Draghi, who attended the Nicosia talks, stressed any bond-buying would require strict conditionality.
Spain’s 2013 budget and a detailed audit of the capital needs of its banking sector are both due on September 28.
For the first time in months, ministers met at a moment when market pressure for immediate action to solve the sovereign debt crisis is easing, rather than mounting.
The ECB’s announcement that it could buy unlimited amounts of Spanish bonds, should it agree a programme with the eurozone bailout fund, brought Spanish 10-year bond yields down from 7.64 per cent on July 24 to 5.62 per cent.