After months of assurances from Spanish Prime Minister Mariano Rajoy that the country will not need an international bailout it seems the reality of the situation has finally hit home as Spain has admitted, for the first time, that it can not raise the money required to refinance the country’s debt.
Asking Europe to stand by the mutual obligations of euro membership the prime minister said Spain is “in an extremely difficult situation,”
“Europe must say where it is going and show that the euro is an irreversible project that is not in danger, that helps nations in difficulty,” he added.
According to treasury minister Cristobal Montoro Spain can no longer raise money as the doors are being closed on them.
“The market is no longer open. The risk premium is telling us that Spain as a state has a problem accessing the market when we need to refinance our debt.”
He also insisted that “the European instistutions must open up and help us facilitate bank recapitalisations.”
Sr Montoro also sent shivers across Europe saying that Spain’s economy is simply to big to be fixed with an EU bailout. “Technically, we can’t really be rescued,” he said.
Montoro said the capital needed for Spain’s banks was substantial but “not astronomic” and would be less than the €40 billion suggested by Santander chief Emilio Botín. “The men in black are not going to come to Spain,” he quipped.
However, despite these comments Spain continues to hold out against making a formal request for help similar to the rescue packages for Greece, Ireland and Portugal, instead asking for EU action to recapitalise Spanish banks.
Spain, the fourth largest eurozone economy, will put two billion euros of bonds up for auction tomorrow which will be considered a key test for the country.
This all comes as the EC plans to outline proposals to stop taxpayers money being used to shore up failing banks, instead making shareholders and creditors responsible for losses. It’s about time, but lets see it put in place before we breathe a sigh of relief.