How To Guides
- Childbirth & Education
- Legal Formalities
- Pensions & Benefits
- Property & Accommodation
Did you know...?
- Airports and Airlines Spain
- Paramount Theme Park Murcia Spain
- Corvera International Airport Murcia Spain
- EUR weekly currency update-27 July 2015
- When Expat Eyes Are Smiling
- Meet Wincham at The Homes, Gardens & Lifestyle Show, Calpe
- QROPS 2014
- Spain Increases IHT in Valencia & Murcia
- Removals to Spain v Exports from Spain
- The Charm of Seville
- Gibraltar Relations
- Retiro Park : Madrid
- Wincham announce opening of Marbella office
- Community Insurance in Spain
- Calendar Girls
- Considerations when Insuring your Boat in Spain
- QROPS – HMRC Introduces changes that create havoc in the market place
- QROPS – All Change From April 2012
Spain in talks with Eurozone over sovereign aid
Spain is negotiating with euro zone partners over conditions for aid to bring down its borrowing costs, though the country has not made a final decision to request a bailout, three sources with knowledge of the matter said on Thursday.
The favoured option being discussed is that the existing European rescue fund, the EFSF, would purchase Spanish debt at primary auctions while the ECB would intervene in the secondary market to lower yields.
Other senior euro zone sources were more cautious, one saying nothing clear-cut had emerged on aid for Spain, while a 5th said no talks were going on at all.
Spain's prime minister's office declined to comment on the issue. A spokeswoman for the economy ministry said there was no change in the Spanish position, which is that it would wait until the next meeting of the governing council of the ECB on September 6, hoping for details on how the ECB plans to intervene, before deciding on any move.
Earlier this month PM Mariano Rajoy inched closer to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached and what form the rescue would take.
ECB President Mario Draghi has said the central bank could intervene to lower painfully high yields but only if the country concerned asked for similar help from the bloc's rescue fund first.
Spain is the latest hot spot in the 2-1/2-year euro zone debt crisis after its ailing banking sector, which sought a €100-billion European lifeline in June, and its highly indebted regions unnerved international investors earlier this year.
Last month, the country's borrowing costs reached their highest level since the launch of the euro single currency 13 years ago. The risk premium investors demand to hold Spanish 10-year paper rather than German benchmark rose on Thursday to 504 basis points, a level seen as unsustainable indefinitely.
"Negotiations have started and are well under way. Right now the preferred option, the one that is being actively discussed, is for the EFSF to buy bonds on the primary market and for the ECB to buy bonds on the secondary," one of the sources told Reuters on condition of anonymity.
The source said no formal announcement would be made before September 12 at the earliest, but things could move quickly after that.
The German constitutional court is due to rule on the European Stability Mechanism - the permanent European rescue fund - on September 12, before which Germany cannot ratify it.
Elections are being held in the Netherlands on the same day while EU finance ministers will meet in Cyprus on September 14 and 15. "Work is ongoing on this. It's a technical discussion on the terms and conditionality," another source who is close to French President Francois Hollande said.
Two of the sources said any announcement could take a few more weeks to be made after mid-September. One pointed out that ratings agency Moody's was due to revise Spain's credit rating around that time, which could see the country could lose its investment grade rating.
The talks will intensify when EU finance ministers gather in Cyprus, the sources said.
A euro zone official told Reuters in July that Spain conceded for the first time at a meeting between Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble it might need a bailout worth €300 billion if its borrowing costs remained unsustainably high.
A full sovereign bailout, as given to Greece, Ireland and Portugal, would be much more expensive and stretch the currency bloc's resources to the limit.
The 3 sources who spoke with Reuters on Thursday said the negotiations were focusing on the conditionality of the aid, which will be included in a new memorandum of understanding.
While there is a political consensus that the conditions should be limited to what is already included in the European recommendations to Spain, which has pushed through a raft of painful austerity measures, two of the sources said euro zone countries were insisting on setting up a tougher schedule of monitoring for the reforms.
"There would be reports every three months and a very tight control of the budget and reforms," the first source said.
"Basically the conditions are already all included in the recommendations we made on May 31. Nothing more. Although we're looking at each of them one by one and making them more specific."
The ECB is participating in the negotiations but will leave it up to member states to decide on the strings attached to the aid, one of the sources said.
The Frankfurt-based institution is considering setting a yield target on purchases under a new bond-buying plan but without making the levels public, central bank sources told Reuters on Thursday.
Such an "implicit target" was one option being examined and would be flexible but nothing would be decided before the ECB's September 6 policy meeting, one source said.
Separately, 2 of the sources said Spain's euro zone partners and the European Commission had dashed its hopes of getting an emergency liquidity line for its banks before the first tranche of up to €100 billion of aid is disbursed in the autumn.
Spanish authorities had hoped to receive up to €30 billion in August to start recapitalising state-rescued banks, such as Bankia, CatalunyaCaixa and NovaGalicia.
"Nobody is willing to disburse the money right now. At a recent meeting, Germany and France, as well as other member states and the European Commission asked Spain to provide more details on why this money is needed and where it would go," the first source said. "Germany and the Netherlands also want to avoid any disbursement before September 12 and it is highly unlikely it will happen by then." Another source said de Guindos did not want to request the emergency funds before the publication of a new bank by bank stress test, due by the end of September.
Spain and its euro zone peers are also finalising the negotiation of the "bad bank" Madrid has been told to set up to clean up the banking sector from real estate assets, most of which are considered toxic after the burst of a decade-long property bubble 4 years ago.
A technical mission from the European Commission, the ECB and the International Monetary Fund will meet officials from the Bank of Spain and the Economy Ministry in Madrid on Friday, meaning the plan won't be adopted before August 31, when the Spanish cabinet next meets.
Latest News & Stories
- New PP Delegate for Murcia brings Corvera Airport Confidence ?
- Spain's Podemos losing support amongst voters - poll
- Spain worse place in Europe for Brits being scammed : Report
- Lycamobile Spain launches "unlimited" European calls plan
- Spain's Euskaltel agrees offer for R Cable
- Galicia crash inquiry stalls 2years after Spain’s deadliest train accident
- FACUA demands Ryanair compensates passengers affected by strike
- Sacyr, still reeling from Corvera upset, struggling with Repsol debt
- Spain's Bankinter H1 net profit up 32%
- Spain sees unemployment fall to 3-Year low end Q2
- Dacion en Pago : Handing Your Property Back to the Bank
- What is the Euribor ?
- When you can’t pay the Mortgage