Rajoy urges Germany and other “creditor” states to stimulate the euro economy

In an interview with the Financial Times published on Wednesday, Spanish Prime Minister Mariano Rajoy defended his management of the economic crisis and insisted Spain had done the right thing in not seeking a bailout, which he believes is not necessary at present.

Rajoy said he would only ask for assistance from the European Stability Mechanism in order to trigger bond purchases by the European Central Bank under its so-called Outright Monetary Transactions (OMT) program if tensions returned to the debt markets.

“People might say that I wasn’t right by not entering the OMT. I am not really bothered by that,” he said. “We took a decision that was right for Spain.”

The prime minister urged Germany and other “creditor” countries in the euro zone to do more to stimulate growth, arguing that a more expansive economic policy would help the recovery in the single-currency bloc as whole. The German economy only grew 0.7 percent in 2012, turning in a fourth-quarter loss of output of 0.5 percent compared to the previous three months.

I think that the second half of 2013 is when we will start to see a recovery"

Turning to his government’s decision to seek a loan to recapitalize the country’s banks, Rajoy insisted he now had no doubts about the state of the Spanish banking sector. “The banking system has done a complete striptease,” he said.

He acknowledged that unemployment remains the country’s “most important problem” but insisted that the labor market reform his government introduced in February of last year would help solve the problem.

According to European Union figures, Spain’s jobless rate hit 26.6 percent in November of last year, well over double the EU average, and the highest in the bloc. He said the increase in unemployment that had taken place since the reform took effect had hit the public and banking sectors. “But in other sectors of the economy jobs have not been lost. So the labor reform has started to bear fruit,” he added.

Rajoy argued that in its push for self-rule, Catalonia was going against the trend. “The world is going in a totally different direction,” he said. “We are working towards greater integration and not the opposite.”

The Popular Party leader pointed to the fact that Spain’s unity dates back to over five centuries. “This is the oldest country in Europe,” he said.

He suggested that a new financial pact between the central government and Catalonia might be enough to lift current tensions between Madrid and the northeastern region.

Rajoy heaped praise on ECB President Mario Draghi’s actions to safeguard the euro, adding that doubts about the future of the single currency are now “history.”

He pointed to rising exports and the increased competitive of Spanish companies as auguring well for a turnaround in the economy, which is estimated to have shrunk 1.3 percent last year. “I think that the second half of 2013 is when we will start to see a recovery, and it will come through very clearly in 2014,” he said.