Spain announces 2010 debt plan

 

Spain's Treasury plans to issue €76.8 billion in net debt in 2010, down 34% from 2009, as the government withdraws crisis borrowing and attempts to reassure markets its debt plan is under control.

"Tesoro Publico is open to additional foreign-currency issuance,'' Treasury chief Soledad Nuñez told investors in London at the start of a two-day roadshow to promote Spain's 2010 debt plan.

Growing nerves surrounding the so-called Club Med countries' ability to finance ballooning deficits forced Spain to announce a massive savings plan to bring the public shortfall back to 3% of GDP by 2013 and an overhaul of the pension system.

Spanish Economy Secretary José Manuel Campa told investors in London that the government will make further spending adjustments if necessary.

"You have to drive as you see the road coming and if suddenly the road turns worse than you thought, you have to reduce your speed. We'll make the adjustment that's necessary,'' he said.

Mr. Campa also said Monday that a euro-zone bond wasn't being discussed, and that contagion from Greece would have a short-term effect on Spain's sovereign spreads.

The premium that investors demand to hold Spanish sovereign debt over core German paper topped one percentage point after the country announced its borrowing plans for 2010, which included €97 billion in gross issuance.

Mr. Campa told Reuters that he didn't think a common euro bond was on the table, one option that has been raised to solve the market turbulence afflicting several of the euro zone's heavily indebted southern economies.

"I think it's something that's …outside of the range of options that we are currently evaluating,'' he said. "It would really depend on what the purpose is and I'm not even sure whether the legal structure would be legally able to do it.''

Last week, Spain raised its 2009 public deficit to 11.4% of gross domestic product from 9.5%.

Meanwhile, most Greeks support their government's austerity program despite a planned public-sector strike, opinion polls there showed.

Four separate weekend polls showed public support of more than 60% for tough measures to fix the country's public finances, and some Greeks wanted stiffer overhauls. The polls also showed relatively little support for recent protests by farmers or for coming strikes by civil servants.

The polls come as Greece seeks ways to cut its budget deficit. The government said late last year that the deficit would likely equal 12.7% of GDP in 2009, double the prior estimate. That news prompted ratings downgrades and a selloff in Greek government debt, which has pushed up the interest rate that the government has to pay. The decline in the value of government debt has sparked worries about the health of Greek banks, which are large holders of government debt. On Monday, bank stocks fell 6.8% on average, and the Athens stock exchange closed lower for the fifth straight day, down 3.9%, even as other European bourses reported gains.