Spain says no need for rescue, claims Europe support

MADRID - Agence France-Presse

A demonstrator wearing a noose stands next to her ‘executioner’ during a recent protest against social services cuts in Gran Via, Bilbao. REUTERS photo

Spain said it had no need of a full-blown bailout and claimed the support of Europe yesterday even as its borrowing rate hovered near euro-era records. Fears mounted among investors that rising interest rates could eventually force the eurozone’s fourth-largest economy to seek an international rescue like Greece, Ireland and Portugal before it.

“Spain has not been rescued because it does need to be rescued. Spain has the support of its European partners and European institutions,” Budget Minister Cristobal Montoro told parliament.
Spain’s eurozone partners agreed June 9 to extend a loan of up to 100 billion euros ($125 billion) to salvage distressed banks, laden with bad loans extended during a real estate bubble that imploded in 2008.

Prime Minister Mariano Rajoy’s conservative government refuses, however, to describe this aid as a rescue or bailout.

“A week ago, Spain was not rescued,” Montoro said.

The minister hailed a Group of 20 summit in Los Cabos, Mexico, where leaders issued a statement saying they welcomed both Spain’s plan to recapitalize the banks and the eurozone’s loan. “What we have to send to the Spanish people is a message of confidence, of calm, of security,” Montoro said. “We are in Europe, we are Europe, we are the euro,” the minister proclaimed.

“From a crisis such as the one we are going through we will emerge strengthening Europe, we will emerge strengthening the euro, we will emerge building a common project, that common project that we saw yesterday in the support from the G-20 declarations,” he said.

The yield on Spanish benchmark 10-year government bonds shattered the 7.0-percent barrier on Monday for the first time since the creation of the euro in 1999, pushing above 7.2 percent. Yesterday, the yield on 10-year bonds still hovered just below seven percent, a rate that the government has conceded is unsustainable over the longer term.

Spain managed to raise 3.04 billion euros in an auction of 12- and 18-month notes on Tuesday but it had to pay sharply higher borrowing rates of more than five percent a year. The battered economy will face a second major test today when it seeks to raise up to two billion euros in an auction of two-, three- and five-year bonds.