Brussels, 19/04/2012 (Agence Europe) - The European Commission has brushed aside rumours that the European Financial Stability Facility (EFSF) may need to step in to help recapitalise Spanish banks. On Thursday 19 April, Madrid made a successful emission of bonds at a slightly higher interest rate (see below). “There is no plan to activate the EFSF to support or recapitalise Spanish banks”, said a European Commission spokesperson, explaining the various stages in bank recapitalisation. Banks must first try to raise funding from the money markets and if they cannot get enough in that way, then the authorities of their country of registration must use funding available nationally and it is only as a last resort, if the first two stages do not provide enough cash, that the European Union will provide aid. The European bailout funds are allowed to help countries bail out their banks, the spokesperson said: “This will not be necessary for Spain, we believe.”
Like their European counterparts, Spanish banks have until the end of June to submit their recapitalisation plans. The Spanish government believes some €50 billion extra finance will be required by Spanish banks to cover potentially toxic mortgages (see EUROPE 10525).
Ten-year bond yield of 5.47%. On Thursday, Spain successfully issued more than €2.5 billion-worth of bonds over two and ten years at a higher rate than for recent operations of a similar nature. The average yield on the €1.4bn of ten-year bonds is 5.7% (compared with 5.4% for a similar emission in February). The two-year bond rate was slightly lower than the most recent similar emission (3.46% compared with 3.49% in October 2011). Spain has now rolled over half of its medium and long-term bonds for 2012 (€43bn of the total €86bn for this year).
The Commission spokesperson welcomed the strong and continued determination of the Spanish government to achieve its aim of cutting its public deficit from 8.5% to 5.3% of GDP this year, also praising the cautious macroeconomic scenario underlying the Spanish budget for this year, which is being fully analysed by the staff of Euro Commissioner Olli Rehn. Member states have until the end of this month to submit to the Commission their stability programmes and their reform programmes under the European semester. On Friday 11 May, the Commission will issue revised growth forecasts. (MB/transl.fl)