Spain will delay deciding whether to seek a sovereign bailout until the aid conditions are clear, Prime Minister Mariano Rajoy said following a meeting with French President Francois Hollande.
The two chiefs, who held talks in Madrid today, pressed the European Central Bank to implement decisions from a June summit to reduce borrowing costs in Spain and Italy as euro-area policy makers struggle to enact an emergency plan.
“In the same way as when we asked for the help for the financial sector because we thought it was good for Spain, so that credit recovers and so that there would be economic growth and jobs, when it’s known exactly what’s on offer, I will take a decision,” Rajoy told a joint briefing.
The discussions today were part of a round-robin of European diplomacy intended to contain a financial crisis that began in 2009 in Greece and has metastasized into a threat to the world’s second-biggest reserve currency. German Chancellor Angela Merkel and Italian Prime Minister Mario Monti sparred yesterday over giving the bailout fund a bank license to boost its bond-buying capacity.
ECB President Mario Draghi took to the German media yesterday to take on Bundesbank orthrdoxy in pressing his case for extraordinary market intervention.
“Don’t count on me to make it even more complicated for President Draghi to carry out his responsibilities,” Hollande said, declining to comment. Hollande said he wanted the June 29 decisions to be implemented “in the best possible timing.”
Spain is urging unlimited bond purchases by the ECB to help lower borrowing costs that rose to euro era records last month. Draghi has yet to spell the details of a plan announced Aug. 2 amid opposition from Germany’s Bundesbank.
The yield on Spain’s 10-year benchmark bond rose 12 basis points to 6.59 percent at 3:55 p.m. in Madrid, widening the gap with similar German maturities to 5.25 percentage points. That compares with a euro-era record of 6.5 points on July 25.
Rajoy opened the door to another European intervention within weeks of signing off on up to 100 billion euros ($125 billion) in loans for its banks. He now has a full diplomatic agenda to “reach a definitive solution to funding problems,” Deputy Prime Minister Soraya Saenz de Santamaria said Aug. 24.
Rajoy commented today in response to a Spanish reporter’s question asking him to respond to speculation that the government would delay a potential bailout until after regional elections are in Galicia and the Basque Country on Oct. 21.
After EU President Herman Van Rompuy and France’s Hollande this week, Rajoy will meet German Chancellor Angela Merkel on Sept. 6, Finnish Premier Jyrki Katainen on Sept. 11 and Italian Prime Minister Mario Monti on Sept. 20-21.
Rajoy is multiplying meetings as Draghi canceled a trip to the annual Jackson Hole economic symposium in the U.S. this week to shepherd the ECB’s negotiations over the bond purchases in the run-up to the central bank’s next meeting on Sept. 6, which is also the day Spain’s next auction is scheduled.
A decision may not be taken until a Sept. 12 ruling by Germany’s supreme court on the viability of the planned euro rescue fund, two central bank officials who declined to be identified said last week.
Spanish Finance Minister Luis de Guindos yesterday said Euro-region finance ministers will work out details of a plan to bring down bond spreads at a meeting in Cyprus on Sept. 14 and 15.