Risk premium hits new high as Rajoy dismisses bailout need

PM demands political leadership from Brussels in euro crisis Ibex 35 falls to levels last seen in 2003

As Spain’s risk premium hit a new euro-era high, Prime Minister Mariano Rajoy on Wednesday dismissed the idea that Spain is negotiating some type of help to overcome its problems.

“Nothing of the sort has been discussed, and I have talks with the main European leaders almost every week,” Rajoy said in his first public appearance this week, which has been marked by turbulence in the financial markets on fears of Greece exiting the euro and doubts about the Spanish banking system

The spread between the yield on the benchmark 10-year government bond and the German equivalent hit a new euro-era high of 507 basis points before closing at 482 basis points. The blue-chip Ibex 35 closed down 1.33 percent at 6,611.50 points, a level last seen in 2003.

“The risk premium rate has risen significantly, which means that it is difficult to finance but we’re doing what we have to do to ensure that the route Spain takes is the right one,” Rajoy said.

I don’t want Greece to leave the euro; it would be a mistake"

Picking up on what his economy minister, Luis de Guindos, has been hammering home this week, Rajoy indicated he would like a stronger defense of the euro project as a whole.

“I think that the debate over austerity and growth makes little sense because one thing is compatible with the other as well as one thing being necessary for the other. I think there is a third thing that nobody is talking about. Austerity yes, growth also, but what I would also like is a strong message on the euro project and the sustainability of the public debt of all European countries.

Rajoy, however, avoiding saying whether what he wanted was intervention by the ECB or the creation of eurobonds.

“Making public declarations [on what should be done] makes no sense. The euro needs to be strengthened. I don’t want Greece to leave the euro; it would be a mistake and bad news. Every country should do what it has to do to guarantee the sustainability of public debt.”

During question time in Congress, Rajoy rejected an offer from the leader of the main opposition Socialist Party, Alfredo Pérez Rubalcaba, to form a pact to help Spain overcome its problems.

Rajoy justified the spending cuts included in the government’s austerity drive as necessary to get the country “out of the hole” it is in. “I am very aware of how tough the situation is and the difficulties that many people are having,” the prime minister added.

The Rajoy administration is aiming to reduce Spain’s public deficit from 8.5 percent of GDP last year to 5.3 percent this year.

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