Rajoy urges Italy to find quick solution to political crisis

Spanish Prime Minister Mariano Rajoy on Monday called for a swift resolution to the latest political crisis in Italy after Silvio Berlusconi withdraw his party’s support for the government of Prime Minister Enrico Letta. Rajoy was clearly concerned about the possible contagion the Italian situation could have on Spain’s borrowing costs.

“The [risk premium] figures for this morning are not what we would have liked, but they are reasonable,” Rajoy said at a joint press conference with Kazakh President Nursultan Nazarbayev during an official visit to the Central Asian country. “I hope Italy resolves the political problems it has because if Italy is going well that is good for Spain.

“In any case I would like to remind you that what Spain can offer to the European Union, apart from the effort being made by Spaniards, is a stable situation because it has a government with a majority that allows it to govern,” he added.

Rajoy said this advantage is helping Spain overcome its crisis, reminding his audience that the economy is set to emerge from its longest recession in close to five decades in the third quarter.

The prime minister also noted that the situation in Spain has changed since last year when the sovereign debt market was under fire. “Spain’s risk premium is rising a lot and Italy’s even more, but the figures are well below those of 2012,” he said. “The debate then was about whether or not the euro was going to break up. The economy is going better; we are realistic but things are improving.”

At one point in Monday’s session Spain’s risk premium shot up to 276 basis points but had settled by the close when it was at 251 basis points. The trend was similar for Italy, whose risk premium closed up slightly higher at 265 basis points.