Spanish Minister of the Economy Luis de Guindos urged unlimited bond buying by the European Central Bank (ECB) to lower the struggling euro country’s borrowing costs as talks on conditions for the aid are planned for next month.
ECB bond buying on the secondary market should be unlimited in duration and size to support the nation’s debt, De Guindos told Spanish news agency Efe in an interview. Terms for the assistance will be discussed at a euro group meeting in the second week of next month, he said. The comments were confirmed by a Spanish official, who asked not be identified, citing government policy.
Spanish Prime Minister Mariano Rajoy is considering requesting another rescue to stem a surge in sovereign borrowing costs two months after securing as much as 100 billion euros (US$123 billion) of European loans for Spain’s banks. Rajoy is struggling to restore investor confidence as a second recession since 2009 makes it harder to meet budget goals.
ECB President Mario Draghi said on Aug. 2 that the bank would buy sovereign bonds to bring down yields if countries applied for similar support from Europe’s rescue fund and accepted strict conditions in return. Spain’s benchmark 10-year bond yield has fallen 76 basis points since Aug. 2 and closed at 6.44 percent on Aug. 17, the lowest in more than a month.
European leaders are struggling to contain a debt crisis that started with Greece, triggered crisis aid for Ireland and Portugal, and has now enveloped Spain, the 17-nation bloc’s fourth-largest economy.
De Guindos told Efe he did not expect any new conditions to differ much from the measures Spain has already planned through 2014. A budget outline sent to the European Commission on Aug. 3 sets out cuts of more than 100 billion euros that will reduce the deficit to 2.8 percent of GDO in 2014, from 8.9 percent last year.
De Guindos said the state-owned lottery is negotiating a syndicated loan of 6 billion euros with national and foreign banks, as previously announced, to help finance an 18 billion euro fund to bail out the regions. De Guindos said the money is already available and that the regions of Murcia, Valencia and Catalonia have applied for it.