Spain holds bailout at bay after debt test
Spain has fended off pressure for a full bailout to end its financial crisis, its economy minister insisting it did not need rescuing "at all".business Updated: Oct 05, 2012 07:16 IST
Spain has fended off pressure for a full bailout to end its financial crisis, its economy minister insisting it did not need rescuing "at all".
The eurozone's fourth-biggest economy yesterday passed a key test of confidence when its borrowing costs mostly eased in a bond auction, and won praise from the European Central Bank for its crisis reforms.
In a speech in London, Economy Minister Luis de Guindos insisted that Spain "does not need a bailout at all," and is "a competitive and sustainable country".
Earlier in the bond sale, Spain showed it can still tap the markets for financing, raising 3.99 billion euros (USD 5.2 billion) in two-, three- and five-year bonds, at interest rates that were mostly lower.
Pressure remained however, with analysts warning that financial markets were counting on a bailout and the governor of the Bank of Spain casting doubt on Spain's fiscal targets and economic outlook.
"The most urgent problem facing the Spanish economy is recovering the trust of the markets," the Spanish central bank's governor, Luis Maria Linde, told a parliamentary committee.
Facing a recession that has left one in four workers unemployed, a bulging deficit and high borrowing costs, Spain remains under pressure from markets and some eurozone partners to seek a full bailout.
Some eurozone powers such as Germany, however, are reluctant for Spain to seek a rescue while it still has access to market financing.
The ECB has outlined a plan to buy Spanish bonds on the open market to curb interest rates, but only if Madrid applies for a bailout and submits to strict conditions from European bailout funds.
ECB chief Mario Draghi lauded what he called Spain's "remarkable" progress in passing reforms of its labour market and banking sector, as demanded by European authorities.
Speaking yesterday after the ECB's monthly rate-setting meeting, he cited progress made on fiscal consolidation, structural reforms and the struggling banking sector but warned that "significant challenges" remained.
Spain's borrowing rates dropped sharply after September 6 when the ECB revealed its bond-buying plan but crept up again later as Prime Minister Mariano Rajoy hesitated on the bailout.