Spain borrowing needs rise on banks, regions

 

Spain's borrowing needs will rise in 2013 from this year as the government pours cash into its battered banking system and its cash strapped regions, the detailed budget document showed on Saturday.

Spain's debt as a ratio of GDP will reach 90.5% by end 2013 after hitting 85.3% of GDP by the end of this year, according to the document.

"The notable increase in the debt-to-GDP ratio in 2012 and, to a lesser extent 2013, is due to a greater debt on the back of the economic crisis and the effect of state instruments on public accounts," the Treasury said in the document.

The instruments include the power deficit bond programme, FADE, the service provider fund for regional governments, Spain's part in aid granted to Ireland, Greece and Portugal and the recapitalisation loan for the country's banks, it said.

Spain is at the centre of the euro zone debt crisis as nervous investors demand ever higher premiums to hold Spanish debt on concerns the government cannot control its finances in the midst of a deepening recession.

PM Mariano Rajoy has delayed any plea for aid, which would kick-start a ECB plan to buy debt and ease financing costs, though this week has passed reforms and a budget plan in what many see is an effort to pre-empt the likely terms of a bailout.

On Friday, an independent report showed Spanish banks will need a total of €59.3 billion in extra capital to ride out a serious economic downturn.

The budget details on Saturday showed Spain's debt ratio included €30 billion of the planned €100-billion aid request for the country's banks.

The Treasury saw gross debt issuance requirements of €207.2 billion next year after budgeting in 2012 for gross issuance of €186.1 billion.

Spain faces debt redemptions worth €159.2 billion next year, up slightly from €153.2 billion in 2012, the document showed.

While almost all the issuance would be in medium and long-term bonds and Treasury bills, the document noted the government would consider issuance of up to 6 billion euros in other currencies or debt instruments.

The Treasury Minister Cristobal Montoro will hold a press conference on the budget details at around 1000 GMT after passing the details to Parliament for approval.