Spain is in a better position to negotiate a full bailout in a period of lower tension on financial markets such as the current one, former Deputy Finance Minister Jose Manuel Campa said.
“The government will be in a better position to request a program in a moment of non stress like now than in a moment of stress,” Campa said in an interview with Bloomberg Television at the Madrid IESE Business school, his first since resuming a professorship after the end of his mandate with Jose Luis Zapatero’s socialist government in December.
“This is like an insurance, you don’t buy it once you have a trauma, you buy it before,” he said.
After months of clamoring for European aid to lower Spain’s unsustainable borrowing costs, Prime Minister Mariano Rajoy has yet to make a decision even after the European Central Bank this month agreed to buy sovereign bonds. He has called for more details on the conditions to be attached to a bailout.
The yield on Spain’s 10-year benchmark bond were little changed basis points to 5.947 percent at 4:21 p.m. in the Spanish capital, compared with a record of 7.75 percent on July 25, a day after Rajoy clinched as much as 100 billion euros ($129 billion) in loans for the banking sector. The spread with similar German maturities was at 4.52 percentage points.
“The government is reluctant to make that decision without having full guarantees that it would have a very positive impact in economic terms that is worthwhile,” Campa said, pointing to the fall of political leaders in Greece, Ireland and Portugal after they requested bailouts.
European authorities should provide “at least some kind of guidance” on the aid that will be provided, Campa said. “Does it mean that the cost of financing the sovereign will drop to the same as for Germany, or twice or once and a half? That’s a relevant question.”
Campa said the government is taking the right steps to overhaul the euro area’s fourth-largest economy and shrink its third-biggest budget deficit, and that these steps should help Spain in its negotiations.
“Since we’re taking these measures that we’re already convinced are good for us, then if we get to that situation, then all this debate about being intervened, conditionality, being directed by the troika becomes meaningless,” he said, refering to the group of monitors from the European Commission, the ECB and the International Monetary Fund.