Spain denies it is next in line for bailout

SPAIN vowed yesterday it would not follow ailing neighbour Portugal in seeking a European bailout, and a successful Spanish bond auction suggested markets do not immediately fear contagion.

The fall of another eurozone domino following Greece and Ireland focused attention on Madrid, testing the efforts that its government, and European authorities, have poured into erecting a firewall to buttress its public finances.

“(The risk of contagion) is absolutely ruled out ... it has been some time since the markets have known that our economy is much more competitive,” Spanish Economy Minister Elena Salgado told national radio station SER.

News that Greece has fallen behind on its deficit reduction target, and rising expectations that Athens will have to restructure its debt, showed that the single currency area has yet to fully resolve the sovereign debt and banking crisis.

Caretaker Prime Minister Jose Socrates announced on Wednesday that Portugal was asking for financial assistance from the European Union, saying the economic risks had become too great to go it alone after borrowing rates soared.

While European Union officials voiced relief, non-eurozone Sweden criticised Lisbon for waiting too long.

“They should have requested aid much earlier,” Swedish Finance Minister Anders Borg told journalists. “They have placed themselves and Europe in a very difficult situation.”

Portugal said it would submit a formal request late yesterday. A senior eurozone source said Lisbon would have to make clear if its caretaker government has the authority to negotiate a bailout before a June 5 general election.

EU officials said a deal would probably be agreed before a new government is elected, signalling Brussels was keen to avoid it being enmeshed in electioneering if possible.

But the campaign may nevertheless complicate talks on austerity measures required to secure EU/IMF rescue loans.