September 24, 2020

Spain: No request for bailout, says minister

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Spain’s economy minister has dampened speculation that the country is about to seek a bailout of its bank sector.

Luis de Guindos said no decision would be made until audits of the banks were completed, possibly by the end of June.

There have been reports that Spain was seeking an immediate bailout from eurozone funds.

The European Central Bank (ECB), meanwhile, dashed hopes that it would further support banks to try to ease the current crisis in the eurozone.

Despite these comments, the major European markets all ended the day more than 2% higher, with some commentators still expecting authorities to intervene soon.

ECB president Mario Draghi acknowledged the seriousness of the situation, but suggested that injecting money into the banking system by way of more long-term loans (LTROs), was not the answer. He put the onus on the region’s governments instead.

“The issue now is whether these LTROs would actually be effective. Some of these problems in the euro area have nothing to do with monetary policy… and I don’t think it would be right for monetary policy to fill other institutions’ lack of action.”

The UK Prime Minister David Cameron and the US President Barack Obama kept up pressure on European leaders, calling for an “immediate plan” to restore confidence.

The prime minister is due to meet the German Chancellor Angela Merkel on Thursday to discuss the issues.

President Obama spoke separately on Wednesday to Mrs Merkel and the Italian prime minister Mario Monti to discuss economic conditions in Europe.

A statement said the leaders agreed on the importance of steps to strengthen the resilience of the eurozone and growth in Europe and globally.

They agreed to remain in contact ahead of a forthcoming summit later this month in Los Cabos, Mexico.

With Spain’s cost of borrowing rising to levels at which Greece, Portugal and Ireland had to seek international bailouts, some had suggested the ECB would restart its programme of offering cheap long-term loans, designed to ease borrowing costs.

The ECB has provided 1 trillion euros ($1.25tn; £800bn) for the banking system with two re-financing operations in the past six months.

Spain’s finance minister said on Tuesday that the credit markets were “effectively shut” to his country, inflaming worries that it will not be able to avoid seeking outside help.

Spain has to find at least 80bn euros to strengthen its banks, which are struggling due to bad property loans.

A key test will come on Thursday, with Spain due to auction up to 2bn euros of bonds.

For more on this story go to:

www.bbc.co.uk/news/business-18333240

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