Spanish Economy Minister Luis de Guindos on Friday said the government would make “important announcements in the next few days” in the area of structural reforms. He also insisted that Europe would not make fresh demands on Spain in exchange for a bailout other than those to which the country has committed itself to reduce the public deficit.
De Guindos, who was speaking to reporters before entering a meeting of the Eurogroup in Cyprus, did not give any details of the planned reforms.
His comments coincided with a statement by the Bank of Spain that Spain’s public debt in the second quarter surpassed 800 billion euros for the first time ever. The figure was equivalent to 75.9 percent of GDP, three points more than last year, and the highest ratio since 1913 when it stood at 77 percent.
Of total debt of 804.388 billion euros, 617.504 billion was central government debt, equivalent to 58.3 percent of GDP, an increase of 2.6 points in the quarter. Regional debt amounted to 150.578 billion euros, with the debt/GDP ratio rising to 14.2 percent from 13.8 percent.
Europe has pledged up to 100 billion euros to recapitalize Spain’s banks but the administration of Mariano Rajoy is weighing up whether to ask the European rescue funds to buy Spanish debt in the primary market as a necessary prior step to the European Central Bank purchasing sovereign debt in the secondary market.
“The fundamental question here is the setting of the conditions imposed by the ECB for intervention in the secondary market,” De Guindos said. "I suppose we will talk about this in a generic manner, and absolutely not in relation to Spain.”
Echoing remarks earlier this week by Rajoy, De Guindos said: “It is much more important for Spain to fulfill its public deficit targets and carry out its reform program than a potential bailout or otherwise.”
It “would be daft” for Spain to seek another bailout if it doesn’t need it, said Germany’s Schäuble
Rajoy received some welcome encouragement from ECB President Mario Draghi who in an interview published Friday in Germany daily Süddeutsche Zeitung praised the reforms undertaken by Spain and Italy, “especially if you compare what has been done in the past months with what was done for many years.”
Without naming sources, Dutch daily Het Financieele Dagblad on Friday reported the ECB and the IMF were working on a rescue package for Spain worth 300 billion euros. It said the IMF would monitor Spain’s compliance with the terms of the bailout.
Rajoy has kept his cards well hidden with respect to the possibility of a second bailout, but De Guindos can expect some pressure from his Eurogroup colleagues to take Spain along this route to cut its borrowing costs.
However, in an interview with Bloomberg published on Friday, German Finance Minister Wolfgang Schäuble discouraged Spain from seeking a full bailout. “I’m not in the camp that says: ‘Take the money,’” Schäuble said, adding it “would be daft” for Spain to seek further funding other than that for its banks if it did not need it.
De Guindos said he planned to inform his colleagues in the Eurogroup about the imminent publication of an independent audit by Oliver Wyman of the Spanish banks’ capital needs. De Guindos said the figure will be in line with an estimate in June of a maximum of 62 billion euros.