Spain rules out Irish-style bailout
Spain yesterday ruled out any Irish-style bailout for the recession-hit, jobs-starved economy, but said it was still undecided about seeking intervention by the European Central Bank to bring down its debt financing costs.
The eurozone’s fourth-largest economy, in recession since mid-2011 and now suffering a 25-per cent unemployment rate, managed to defy widespread predictions in the financial markets that it would be forced to seek an ECB rescue in 2012.
Asked in an interview with ABC Radio whether Spain would seek a bailout, Economy Minister Luis de Guindos said: “I am not saying that we are going to ask for it or not ask for it. What I am saying is that the Spanish government will take the decision that it believes to be the most appropriate at the appropriate time.”
But in any case, De Guindos said ECB assistance in the markets would not be a bailout of the kind carried out in Ireland or Portugal, both of which had no access to the markets and had to be financed by the European authorities and the International Monetary Fund. “That is not a bailout. It is not a Portuguese or Irish-style bailout. I realise that from the journalistic point of view it generates a lot of interest if you speak of a bailout, but it is not a bailout in any sense,” he said.
The ECB outlined plans in September to buy an unlimited amount of stricken states’ bonds to drive down their borrowing costs but only if they first apply for help from European bailout mechanisms and submit to strict conditions.
The mere prospect of central bank intervention has sent Spain’s borrowing costs tumbling.
Spanish 10-year bond yields spiked at a dangerous level of more than 7.0 per cent mid-year, when speculation of an imminent rescue was at its height. This week, the bonds were trading at less than 5.3 per cent.
Spain also has completed its 2012 bond-selling programme to finance government activities, and has embarked early on raising money for 2013.
Prime Minister Mariano Rajoy’s government performed a U-turn on his pre-election promises by pushing up sales taxes from September 1 to curb the public deficit. But De Guindos said a further increase in sales tax in 2013 was “absolutely not on the table.”