Spanish
government credit denied as country’s fiscal woes worsen
5
June, 2012
MADRID
– Spain’s Budget Minister Cristobal Montoro on Tuesday urged
euro-zone partners to act faster to help support its enfeebled banks,
saying that the government has effectively lost access to capital
markets because of steep risk premiums demanded by sovereign bond
investors.
In making this dramatic admission, Mr. Montoro joined
recent calls by the Spanish government for direct aid from European
Union institutions for Spanish banks as the government hopes to avoid
a full-blown bailout package.
The matter has gained urgency after
Madrid was forced into a €19 billion ($23.75 billion) rescue of
lender Bankia SA, while the government’s borrowing costs have
surged to record highs with yields on Spanish 10-year bonds staying
above the 6% mark for the third straight week. Midday in Europe, the
yield was at 6.37%. By comparison, the yield on the German 10-year
bond, considered a haven for investors, was at 1.20%.
“What this
premium tells us is that the state, and Spain as a whole, has a
problem when it comes to accessing markets, when we need to refinance
our debt,” Mr. Montoro said in a radio interview. “What that
premium says is that Spain doesn’t have the market’s door open,
as such, the challenge is to open that door and regain the confidence
of those markets, our creditors.”
The warning from Madrid was
reminiscent of similar alarms over prohibitive borrowing costs
sounded by Greece, Portugal and Ireland before entering into bailout
talks with such international lenders as the European Union and the
International Monetary Fund.
However, Mr. Montoro indicated that
Europe should allow its institutions to directly recapitalize banks,
stressing that a wider rescue plan is an unfeasible and unnecessary
option for the euro zone’s fourth-largest economy.
Under existing
agreements, the euro zone’s bailout funds cannot be used to
directly recapitalize banks. “Spain can’t really be bailed out,
from a technical point of view,” Mr. Montoro said.
-
WSJ
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