Spanish Finance Minister Cristóbal Montoro on Tuesday acknowledged Spain needed external help to recapitalize its banks because of the prohibitive jump in its borrowing costs, but ruled out any socially and politically onerous intervention along the lines of those of Greece, Ireland and Portugal.
Meanwhile, in the Senate Prime Minister Mariano Rajoy for the first time in public defended the need to create eurobonds, a move that Germany is only willing to contemplate in the indefinite future.
Spain has been pushing for banks to be allowed to directly tap the European Stability Mechanism (ESM) without the ignominy of the government having to formally ask for a rescue package in its name. The European commissioner for economic affairs, Olli Rehn, on Monday suggested that this proposal should be seriously considered by Europe, although Germany is still reticent about such a move.
“What the risk premium is saying is that as a government we have a problem when it comes to accessing the markets in order to refinance our debt,” Montoro said in an interview with radio station Onda Cero. “The current risk premium says that the door to the markets is not open for Spain.” Spain’s risk premium closed Tuesday down 10 basis points at 511.
What is needed is bank recapitalization through procedures that mean more Europe”
Montoro insisted that Spain was too big to fall and that there would be no full-scale bailout for the country. “From the technical point of view, Spain cannot be rescued. The men in black won’t be coming,” the minister said.
Montoro said Spain is doing its homework in terms of reforms and moving to rein in its public deficit, and insisted Europe as a whole needed to move to ensure the future of the euro zone. “They have to put their faith in the euro to resolve the problems of the members of the club that are carrying out the necessary reforms,” the minister said.
He did not provide a specific figure, but insisted the sums required to clean up the Spanish banking system were not huge.
Banco Santander Chairman Emilio Botín on Monday estimated that about 40 billion euros was needed to recapitalize Bankia and the three other banks that have been nationalized: Caixa Catalunya, Novagalicia and Banco de Valencia.
“We’re not talking about astronomical figures \[...\],” Montoro said. “The figures are perfectly accessible. What is needed is that the European institutions get going and seek that bank recapitalization through procedures that mean more Europe.”
He suggested that the current debate about a banking union in Europe could be resolved before the European summit slated for the end of this month.
Reuters on Tuesday quoted an unnamed source as saying that Germany is continuing to push Spain to accept a bailout. “They don’t want to. They’re too proud. It’s fatal arrogance,” the source said.
However, some Spanish banks are moving toward the idea that tapping the European Stability Mechanism might be in the interests of the sector.
“Using the mechanisms for assistance from Europe or the IMF is the best option and more and more the banking industry is taking that view,” Bloomberg quoted Juan Carlos Ureta, chairman of Renta 4 Banco SA, a Spanish bank and investment services company, as saying.
“There is the risk of a possible stigma and that is why it’s so important to stress that it’s only some institutions that are in difficulties while the industry as a whole is healthy,” Ureta added.
However, German Finance Minister Wolfgang Schäuble had words of praise for Spain. “The Spaniards have been doing things well, but have been subject to market pressure,” German daily Handelsblatt quoted him as saying on Tuesday.
The OECD’s secretary general, Ángel Gurría, also said Spain was being unfairly singled out by the markets.