Salgado confident Spain can deal with likely ECB interest rate

 

Spain's Minister for the Economy, Elena Salgado, yesterday said how the country could raise interest rates "without problems" as the Treasury sold 3-month bills at under 1% for the first time since before the Irish debt crisis exploded at the end of last year.

The ECB President spoke earlier this month to say how they were ready to raise official rates in response to a jump in inflation as early as April. The ECB's key lending rate has been at 1% since May 2009.

In a report released yesterday, the Organization for Economic Cooperation and Development (OECD) said monetary authorities may not have to react to the hike in oil prices sparked by the conflict in Libya if inflationary expectations remain subdued.

Pressure on Spanish debt in the secondary markets has eased recently in the wake of European leaders' agreement this month to bolster the rescue fund for countries with debt problems.

Salgado commented that the purpose of the European Financial Stability Facility, which is to be replaced by a permanent emergency mechanism in 2013, was to demonstrate to the markets that euro-zone countries in difficulties would receive help from their European partners.

It also emerged earlier in the week that Norway's state pension fund had tripled its exposure to Spanish government debt last year, with a portfolio worth 3.25 billion euros at the end of December.

Spain's risk premium has now fallen well below 200 basis points.