Spanish PM says bailout not imminent

Mariano Rajoy denies reports that Madrid is on verge of seeking a bailout while meeting leaders of country’s regions.

New jobless figures suggest one in every four in the Spanish workforce are now unemployed [Reuters]
New jobless figures suggest one in every four in the Spanish workforce are now unemployed [Reuters]

Mariano Rajoy, the Spanish prime minister, has said that a new bailout for his country is not yet imminent.

Rajoy made the comment on Tuesday after a meeting in the capital Madrid with the 17 leaders of Spain’s regions.

In response to a report by the Reuters news agency that Spain could apply for European aid as soon as this weekend, Rajoy said: “If a news agency reports that we’ll ask for aid this weekend, there can only be two explanations: that the agency is right, and knows more than I do, which is possible, or that they are not right.

“But, if it helps, and you accept that what I say is more important than this leak, I say no [we won’t ask for aid this

According to the Reuters report, European officials had said late on Monday that Spain was ready as early as next weekend to ask the euro zone and the European Central Bank to start buying its bonds, but Germany had signalled it should hold off.

Spain is the current focus of investor attention as Rajoy struggles to deflate one of the euro zone’s largest public deficits while the country sinks deeper into its second recession in three years.

The number of jobless in the country rose further in September as service sector layoffs accelerated at the end of a
busy summer tourist season, suggesting one in four of the workforce is now unemployed.

Rajoy reached an agreement on fiscal consolidation with the regions, but provided no further details on how the local authorities planned to balance their accounts.

The central and regional governments will discuss at a future date how the country’s deficit would be divided, he said.

This year, the central government’s public deficit target is 4.5 per cent of gross domestic product while the regions must
reduce their own shortfall to 1.5 per cent of GDP.

By 2014 the central government will aim for 2.7 per cent while the regions will target 0.1 per cent of GDP.

Shut out of international debt markets and facing debt redemptions worth almost $20.7b before the end of the year, five of the more indebted regions have asked for help from an $23b fund set up by the central government.

As investors wait for Spain’s decision on the European bailout, ratings agency Moody’s said on Monday it would publish
a review on the country’s sovereign debt, just one notch above junk grade, sometime this month.

The agency had been due to report on Spain before the end of September, but a Moody’s spokeswoman said the review was ongoing.

“Moody’s review of Spain’s rating is continuing to assess a number of factors, including Spanish banks’ capital needs, the nature and size of support mechanisms, the recently released 2013 budget plan and the consequences for the euro area’s crisis management framework of the further advancement of a banking union,” the spokeswoman said.

Moody’s last cut Spain in June 2012 to Baa3 from A3.

If the agency decides to cut the rating by one notch or more, Spain would become the second of the world’s top 12 economies to lose its investment grade, the other being India.

Standard and Poor’s has a BBB+ rating on Spain’s sovereign, three notches above junk. Fitch rates Spain two notches above junk, at BBB.

Source : News Agencies

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