Spain's PM to meet U.S. investors in bid to raise credibility

 

Spain's Prime Minister Jose Luis Rodriguez Zapatero will meet George Soros and other major investors in Spanish debt in New York next week as the country seeks to increase its credibility after a sell-off in its debt earlier this year.

Investor confidence in Spain appears to be returning, reflected in a successful bond auction on Thursday, and a revival in foreign investor interest suggests Spain is no longer seen as quite as risky as Greece, Ireland and Portugal.

Zapatero will meet Soros of Soros Fund Management and John Havens, chief executive of Citigroup's institutional clients group, as well as Edward Pick, a managing director at Morgan Stanley and David Solomon, investment banking director of Goldman Sachs among others at a meeting on Tuesday, Spain's Ministry of the Presidency said in a statement.

"It's sort of a roadshow. He's going to sell them on the country" said a source at the presidential palace, who did not wish to be identified.

The spread between benchmark Spanish bonds and German bunds soared between April and June to more than 220 basis points from about 70 basis points as investors feared Spain's high deficit could force it to seek emergency funding as Greece has had to do.

The spread, seen as a measure of the risk of investing in Spain, has since come down to about 180 basis points as Zapatero has imposed tough austerity programmes, aiming to slash the budget deficit to 3 percent of gross domestic product by 2013 from 11.2 percent last year. He also pushed a labour market reform through Congress.

Spain comfortably sold 4 billion euros of long-term debt on Thursday with strong foreign demand suggesting growing investor confidence. The Treasury plans eight benchmark bond auctions in the fourth quarter including a new five-year benchmark.

Investors are likely to quiz Zapatero about recent government announcements that Spain's cost of borrowing has come down enough for it to roll back some of the austerity measures.

The spending cuts have raised concerns that Spain's economy, which is slowly emerging from a painful recession, could fall back into recession.

Credit rating agency Moody's said in July it was reviewing Spain's ratings and could cut them by as much as two notches due to sliding growth expectations and mounting fiscal challenges.

Economy Minister Elena Salgado said on Friday she did not expect Moody's, the only major agency that still maintains a top rating for Spain, to downgrade the country.

"I don't have that perception" she said at a weekly government press conference.