Rajoy downplays Hollande’s notion of rescue plan for Spanish banks

Obama: “Company cutbacks in Madrid might mean less business in Milwaukee”

Prime Minister Mariano Rajoy on Saturday night downplayed statements made by French President François Hollande, who suggested that Spanish banks might need a bailout from the European Union (EU).

“A bailout won’t be necessary,” Rajoy said after he arrived in Chicago for a NATO leaders’ summit. “I don’t really know if Mr Hollande said that, because if he said it, it must be because Mr Hollande has information that we don’t have.”

On Friday, ahead of attending the G8 summit at Camp David, France’s recently sworn-in new leader said that Spanish banks should be recapitalized with Europe’s aid, contradicting earlier statements made by Olli Rehn, the EU commissioner for economic and financial affairs, who said the country can do that on its own.

“It would probably be desirable to have a recapitalization,” Hollande said at a news conference in Washington Friday. “It would probably be necessary for this recapitalization to take place through mechanisms of European solidarity.”

Concern for Spain, as well as the entire economic situation in Europe, was also addressed by US President Barack Obama during a statement he gave following the G8 summit. “Put simply, if a company is forced to cut back in Paris and Madrid, that might mean less business for manufacturers in Pittsburgh or Milwaukee,” the US president said.

Moody’s Investors Service on Thursday cut the debt ratings of 16 Spanish banks by one to three notches, citing the ongoing recession and the government’s own reduced creditworthiness.

But Rehn said he believed Spain could provide its own aid to its financial institutions. “Spain is not comparable to, for instance, Ireland, which had a banking sector many times larger compared to gross domestic product,” Rehn told Bloomberg Television. “Spain has the starting point that it can deal with this challenge on its own without resorting to European assistance.”

In his brief meeting with reporters in Chicago, Rajoy emphasized that independent outside auditors were hired by the Bank of Spain to look at the health of the country’s financial institutions.

He also dismissed the Finance Ministry’s new revision of Spain’s deficit for last year, which could jump to 8.9 percent from the previous figure of 8.51 percent of GDP after auditors examined the budgets of several key regions, which showed a bigger shortfall than previously thought.

“We now know where we are, and from that point, we are going to begin to rebuild,” Rajoy said without commenting further on the new deficit figure.

Meanwhile, opposition Socialist leader Alfredo Pérez Rubalcaba said he would call Rajoy on Monday to coordinate a common strategy ahead of Wednesday’s informal EU summit. “It would be for the best if Rajoy and I defend the same position in Brussels,” Rubalcaba said Sunday.

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