The EU said yesterday it is working with the Spanish government on a national reform programme due to be announced next week, but insisted that this did not mean it was preparing a sovereign bailout.
“This is something the Spanish government is planning, something the Spanish government is claiming full ownership of,” said Simon O’Connor, spokesman for EU Economic Affairs Commissioner Olli Rehn.
He spoke amid mounting speculation Madrid may seek a full rescue on top of EU aid already agreed for its banks, said to be politically possible only once “conditions” it would have to meet in that event are thrashed out.
“We are cooperating very closely with them,” O’Connor told a press briefing, adding that country-specific reform recommendations already drawn up by the Commission for all 27 EU states would serve as a template.
“Further decisive progress in taking forward the reform agenda is, we believe, the best way for Spain to re-establish confidence,” O’Connor said.
“That is in the interests of Spain and of the euro area as a whole.”
However an EU source indicated that the reform programme would serve well in case Spain cannot get by without asking for help from the EU bailout fund and a new bond-buying facility announced earlier this month by the European Central Bank.
The source said “our approach is to be prepared in case there is fresh pressure placed on Spain by markets going forward.”
With opinion in Spain firmly against requesting any help which involves additional requirements from Brussels, the source said the idea is that “the Commission will be able to say that it is ready and that no extra conditions will be required” in the event Spanish Prime Minister Mariano Rajoy formally asks for a bailout.
Eurozone sources said that the past week has been marked by shifting opinions that have Germany and Spain resisting pressure from France and the Commission for Madrid to request a full bailout.
One source said that “the Germans are not in favour of a programme at this stage,” and that Berlin and a number of other eurozone countries would prefer to wait and see if Spain can manage without a rescue.
If Spain remains unwilling to lodge a request for aid with the EU – the necessary first step for a bailout – “it makes no sense to start a reform programme” wider than that already laid out in the banking aid accord.
Under the banking aid deal, worth up to €100 billion, Spain agreed to reforms in the sector and wider economy so as to avoid a repeat of the banking sector’s disastrous over-exposure to a collapsed property market.