Economy Minister Luis de Guindos said Spain is pressing on with its analysis of whether to seek a bailout, moving beyond his call last week that the European Union needed to provide more guidance on conditions.
Following a meeting with Economic and Monetary Affairs Commissioner Olli Rehn in Madrid today, De Guindos said Spain is now studying the European Central Bank bond-buying proposal.
The move in Spain comes as European leaders enter a month that may decide the success of the central bank’s bid to end the debt crisis by pledging bond purchases. Spanish Prime Minister Mariano Rajoy, who spent six months campaigning for ECB President Mario Draghi to buy bonds, has been weighing the benefits of seeking aid since Aug. 2.
“A responsible government analyzes those commitments with care and attention,” De Guindos said at a joint press conference with Rehn. “That is what the Spanish government is doing and obviously it will take the best decision for the interests of the Spanish economy and the whole of the euro zone.”
As Rajoy faces unrest on the streets of Madrid over budget cuts and a separatist movement in Catalonia, leaders of the 17-nation euro area are confronting a tougher approach from the German-led pro-austerity bloc and talks in Athens over keeping emergency aid on track.
The first of three summits in the next three months, called “crucial” by European Union President Herman Van Rompuy, is set for Oct. 18-19, as investor sentiment toward the euro area is on the wane after surging in September.
“People are beginning to look at this in a more sober way” after the ECB bond-buying plan and a German high-court decision releasing bailout financing spurred optimism over the past month, Clemens Fuest, an economist at Oxford University’s Said Business School, said in an interview yesterday.
Political discord has underscored the inadequacy so far of Draghi’s offer of unlimited bond buying to overcome that the squabbling that has hamstrung crisis-fighting efforts. With a report today showing euro-area unemployment climbed to a record 11.4 percent, October marks three years since Greece’s newly elected Prime Minister George Papandreou revealed an unexpected hole in his budget, triggering the turmoil.
Spain’s 10-year bond yields fell 8 basis points to 5.86 percent as last week’s stress-test results showing a capital deficit of 59.3 billion euros ($76 billion) bolstered confidence in Spain’s banking system. The euro rose 0.3 percent to $1.2904 as of 4:40 p.m. in Frankfurt, recovering after losing 2 percent over the past two weeks.
Amid two days of protests in Madrid last week, Prime Minister Mariano Rajoy’s government unveiled a fifth austerity package in nine months. Spain’s Budget Ministry announced plans over the weekend to borrow 207.2 billion euros ($267 billion) next year, widening the country’s debt to 90.5 percent of gross domestic product.
“I don’t think we’re moving toward disaster, but it will become increasingly clear that regaining competitiveness will last a long time for these countries.” Fuest, who sits on an advisory panel for the German Finance Ministry, said by phone.
Leaders need to put aside disagreements, particularly on how bailout funds can be deployed to recapitalize struggling banks, Rehn said in an interview yesterday in Haemeenlinna, Finland. A statement last week by finance ministers from Germany, Finland and the Netherlands that such funds can’t be used to cover past capital gaps marked a retreat from a June agreement.
“It seems there have been different interpretations about the June decision,” Rehn said. He also warned Finland not to prolong the crisis with its “hard-line stance on many issues.”
Rehn today said that all euro members are aware of the conditions that would be attached to a rescue package, as he sat alongside de Guindos at the press conference. He earlier met Rajoy and central bank governor Luis Linde.