Spain will wait for clarity on rescue fund to ‘draw up a precise calendar’

Spain has time to wait for clarity on what a full European rescue would involve as it has already covered the majority of its debt needs for the year, economy minister Luis de Guindos said yesterday.

“We will find out the details and then we will draw up a precise calendar,” Mr de Guindos said when asked if the country would ask for aid in September.

“We’ve got time... the treasury is financing itself relatively well in the market, given the circumstances,” he said.

Spain’s prime minister Mariano Rajoy signalled for the first time, on Friday, he may seek a full-blown aid package, but he had not yet made a decision. Spanish bonds surged after the comments.

The ECB last week said it was preparing to buy Spanish and Italian bonds in order to reduce those countries’ crippling borrowing costs; but only after EU bailout funds were triggered and countries had asked for help.

In the interview with ABC newspaper, Mr de Guindos said the market was not performing normally. “It’s clear this is an abnormally functioning market and when that happens, institutions must intervene. That is essentially what the ECB said last Thursday.”

A Reuters poll of nearly 50 economists found most expecting the ECB to start buying Spanish and Italian bonds in September.

Ten-year Spanish government bond yields fell 30 basis points on Friday but, at 6.95%, yields were still close to levels considered unsustainable. On the primary market, Spain easily sold €3.1bn-worth of debt on Thursday, at yields well below recent peaks.

An aid request for Spain would involve negotiating terms with other eurozone countries and any package will come with a strict set of conditions.

Spain’s programme of spending cuts and reforms was enough to achieve budget deficit targets agreed with Brussels and the IMF. The European Commission and ECB had recognised Spain’s efforts, too, Mr de Guindos said. “We have done our part,” he added.

The Spanish government said on Friday it had submitted its budget plan for the next two years to the commission, in which it pledged to save €102bn by boosting revenue and spending cuts.

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