Spain 'will not rush' for external aid
Spain will not rush to seek external aid to finance its debt, economy minister Luis de Guindos said today, adding that the country's banks would need €60 billion to clean up the toxic property assets on their balance sheets.
Mr De Guindos said deficit-cutting efforts would remain a priority for the government, which next week presents its draft budget plan for 2013, new structural reforms and the results of stress tests on its wobbly banking sector.
Spain is at the centre of the euro zone debt crisis, now in its third year, and investors believe a high deficit, soaring debts, a banking sector brought low by the bursting of a real estate bubble and a deepening economic contraction will eventually force Madrid to seek more external help.
The government sought a €100 billion European credit line to recapitalise troubled lenders in June. It has been in talks for weeks over a bond-buying programme from the European Central Bank (ECB) and the euro zone rescue funds which it is hesitating to request because of concerns over the strings attached.
"This is not about rescuing Spain but about making sure that the euro currency project is a project for everybody. Spain will do what it has to do but with no rush," Mr De Guindos said when asked about the possibility of seeking this assistance in the next few days.
But with mounting funding needs, big repayment humps looming and an economy which, according to Mr De Guindos, is set to contract by another 0.4 per cent in the third quarter of the year, Spain may have to move sooner rather than later.
As Reuters reported first last month, Spanish officials have been talking discreetly to the European Commission since at least early August about possible conditions and supervision for a precautionary programme that would keep Spain in capital markets and bring down its borrowing costs.
While some sources suggest Madrid could make the move along with the budget package to pre-empt a credit review by ratings agency Moody's, which might otherwise downgrade Spanish debt to junk status, EU officials said they did not expect prime minister Mariano Rajoy to seek an assistance programme before a regional election in his native Galicia on October 21st.
EU paymaster Germany said yesterday that Spain did not need a European bailout, contrasting with French pressure on Madrid to avail itself of ECB help.
Mr De Guindos also confirmed that he expected the results of an independent stress test of Spain's banking sector conducted by consultancy Oliver Wyman to be in line with preliminary estimates released in June of €60 billion.