Prime Minister Mariano Rajoy today said Spain is paying “unreasonable” interest rates because of the country’s high debt level, which is depriving the euro area’s fourth-richest economy of credit.
“Those that owe the most are more affected when access to markets is difficult,” Rajoy told parliamentary members during a meeting of his People’s Party in the northern city of San Sebastian. “There are many funding difficulties, for financial entities, for big companies, for regions, and we are paying interest rates that are far from being reasonable.”
Rajoy has called on the European Central Bank to lend financial support as it sees its access to markets threatened by surging yields. Deputy Prime Minister Soraya Saenz de Santamaria yesterday said the nation won’t need more cash from European rescue funds to meet its goal to slash the euro area’s third-largest budget deficit by 40 percent this year.
Rajoy said that total debt, including public and private borrowing, is now more than the country’s gross domestic product.
Spain’s bond yields surged the most since the euro was created in 1999 this week, with the 10-year approaching 7 percent after the nation requested as much as 100 billion euros ($126 billion) in aid for its banks, and Moody’s Investors Service cut its credit rating to one step above junk.
“Europe needs more political, fiscal and banking integration,” Rajoy said while the PP’s parliamentary members together called for a solution to Spain’s funding and liquidity difficulties in an e-mailed statement.
Spain’s financing needs are increasing along with its costs. The International Monetary Fund yesterday forecast the economy will continue to shrink next year and that the country will miss its budget-deficit target of 5.3 percent of GDP this year after a shortfall of 8.9 percent last year.
Spain’s total public debt rose to 72.1 percent of GDP in the first quarter from 68.5 percent at the end of last year, and it’s more than doubled since before the start of the crisis in 2008, the Bank of Spain said yesterday.
The debt ratio would rise to 90 percent of GDP if Spain borrows the full amount of the 100 billion-euro credit line for its banks, according to Moody’s.