Rajoy Calls for Direct ESM Bank Support While Ruling Out Rescue

Photographer: Pierre-Philippe Marcou/AFP/Getty Images

Spanish Prime Minister Mariano Rajoy during a news conference in Madrid, on May 28, 2012. Close

Spanish Prime Minister Mariano Rajoy during a news conference in Madrid, on May 28, 2012.

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Photographer: Pierre-Philippe Marcou/AFP/Getty Images

Spanish Prime Minister Mariano Rajoy during a news conference in Madrid, on May 28, 2012.

Prime Minister Mariano Rajoy said the euro region’s rescue fund should be able to bypass national governments and recapitalize distressed lenders directly, even as he argued that Spanish lenders won’t need external support.

“Lots of people are in favor of that, and I certainly am,” Rajoy told reporters in Madrid today at a hastily called news briefing as Spanish markets tumbled. “There won’t be any rescue of Spanish banks.”

European leaders are split over whether the European Stability Mechanism should be able to recapitalize banks directly, an EU official said on May 22, as its statutes say support must be channeled through national governments. Spain, which nationalized the country’s third-largest bank this month, is trying to shore up lenders and help cash-strapped regions as its own 10-year bond yields approach the 7 percent level that prompted bailouts in Greece, Ireland and Portugal.

Rajoy also repeated calls to European authorities to support Spanish (BKIA) debt and erase doubts over the euro’s future. He didn’t mention the European Central Bank by name, as he did after a European summit on May 23.

“The government is doing what it should be doing,” Rajoy said, as he called for more political, fiscal and monetary integration in the 17-nation euro region. “Europe must dissipate any doubts over the euro, affirm that the euro is an irreversible project and act in consequence.”

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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