Greek bail-out welcomed by Bank of Spain

The Greek bail-out was welcomed by Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, who described the weekend agreement as “a really important advance”.

However, he also reiterated warnings that Spain needed to tackle its 11.2 per cent budget deficit. The Spanish government, led by socialist José Luis Rodríguez Zapatero, says it is committed to reducing this to 3 per cent by the end of 2013.

Investors, however, remain sceptical, while rating agency Standard & Poor’s last week downgraded the country’s credit rating over doubts about its ability to meet the targets. These doubts, coupled with concern over Greece’s future, has helped push up Spain’s lending costs in recent weeks.

Societe Generale, in an economic bulletin on Monday, said the Greek package was “unlikely . . . to spell the end of the European sovereign debt crisis”, as investors focused on fiscal policies and the willingness of stronger states such as Germany to support peripheral countries.

“Until resolved, the question of the fiscal policy framework is set to remain a structural drag on the euro and the market will continue to carefully distinguish between euro area sovereign issuers,” the bank said.

Mr Ordóñez said on Monday he expected the Greek rescue deal to calm markets once it was implemented.

However, while stressing that Spain’s public debt level – at 55 per cent of gross domestic product – was much lower than that of Greece, he said there were lessons for the country from the rescue.

“Spain’s fiscal problem is serious and we need to face it as a country,” he said.

Meanwhile, Mr Zapatero is this week scheduled to meet Mariano Rajoy, the opposition leader, to shore up parliamentary support for Spain’s part in the Greek rescue. Spain will provide about €9.8bn of the €110bn total agreed at the weekend.