Brussels, 11/04/2012 (Agence Europe) - The new burst of turbulence on the eurozone sovereign debt markets in response to fears about the Spanish economy is generating bitter commentary from European leaders, the most recent one being the Italian prime minister, Mario Monti (see EUROPE 10591). Spain's prime minister, Mariano Rajoy (Conservative) answered the country's critics on Wednesday 11 April, saying in a speech to Partido Popular MPs (reported in El Pais) that the eurozone situation on the financial markets was hugely complex and there had been further statements from Europe's leaders on Tuesday, but Rajoy said that Spain was not attacking anyone and not talking about other countries, wishing them all the best. He said what was good for Spain was good for the eurozone, both of which had problems, and the Spanish government was working to solve them and help the eurozone. He hoped other governments would do likewise and would be careful not to make rash statements. Rajoy said all the leaders had a big responsibility - to create a strong Europe and a strong euro.
Speaking in Egypt on Tuesday, Mario Monti said that the increase in the Italian bond yield rates were not due to Italian problems as such, but were a rebound from Spain's crisis. On Wednesday, the Italian Treasury issued €11 billion in short-term bonds at rates much higher than in similar emissions. The rate demanded by the markets for €8bn over 12 months was 2.84%, double the rate demanded in the most recent 12-month issue (a month ago). The rates demanded for long-term Italian debt, however, which had dropped to below 5.5%, rose slightly in the light of Tuesday's market conditions.
Rajoy said that Spain would be able to roll over its debt unaided on the markets and therefore would not need any international aid. He said there were countries in Europe that had not managed to roll over their debts, but not Spain and Spain would always be able to finance itself in the future also. After the elections in Andalucia, where the PP failed to take power from the Left, the government unveiled a draft 2012 budget on 31 March to make savings of €27 billion and cut the country's deficit from 8.5% of GDP to 5.3% and below 3% in 2013. After failing to roll over debt last week, it announced new cuts on Monday of €10bn in health and education spending, mostly from the budgets of the Spanish regions.
On Tuesday, the European Commission pointed out that it was still assessing Spain's draft budget and would not be able to complete its assessment until it received details of Spanish regional budgets and social security systems. Like all other EU countries, Spain has until the end of this month to submit to the Commission its Stability and Growth Programme and structural reform plans.
Rajoy's government has decided to speed up changes to the country' banking system, hit by the economic recession (the economy is expected to shrink by 1.7% in 2012) and the collapse of the property bubble. Nationalised banks will be sold to healthy private banks. Like other banks in Europe, Spanish banks have until 30 June 2012 to submit their recapitalisation plans. The Spanish government says some €50bn extra resources will be needed to cover risky mortgage lending (see EUROPE 10525). Quizzed about intervention from the European Financial Security Facility to bail out Spanish banks, a Commission spokesperson said this was out of the question. (MB/transl.fl)