SPANISH ECONOMY secretary Jose Manuel Campa said a euro zone bond was not being discussed at the moment and contagion from Greece would have a short term effect on Spain’s sovereign spreads.

The premium investors demand to hold Spanish sovereign debt over core German paper rose above 100 basis points yesterday after the country announced its borrowing plans for 2010, which included €97 billion in gross issuance. The premium for Irish debt was just under 180 basis points.

Mr Campa said he did not think a common euro bond was on the table, one option that has been raised to solve the market turbulence afflicting several of the euro zone’s heavily-indebted southern economies.

“I think it’s something that’s not being discussed and is outside of the range of options that we are currently evaluating,” Mr Campa said following an investor presentation in London.

“It would really depend on what the purpose is and I’m not even sure whether the legal structure would be legally able to do it.”

Market turbulence surrounding heavily-indebted Greece was a short term effect and would not hurt Spain in the medium to long term, he said.

“It’s a short term thing,” he said.

Mr Campa is on a two-day roadshow to promote the government’s 2010 debt plan. Last week, Spain was flagged as the euro zone’s next victim of diving investor confidence on fears of run-away debt after the government raised its 2009 public deficit to 11.4 per cent of gross domestic product from 9.5 per cent.

Growing nerves surrounding the so-called Club-Med countries’ ability to finance ballooning deficits forced Spain to announce a massive saving plan to bring the public shortfall back to 3 per cent of GDP by 2013 and a reform of the pension system. – (Reuters)