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Zapaptero says Spain is 'doing its homework' on reform

Source: Reuters - Sat 27th Nov 2010

Spain is demonstrating its commitment to transparency and reform to shore up its economy, Prime Minister Jose Luis Rodriguez Zapatero said on Saturday after a week of intensifying market pressure on its borrowing costs.

"The government has a commitment to cut its deficit ... to complete structural reforms ... It is doing its homework" Zapatero told journalists after a meeting with the heads of Spain's top 37 companies.

He said the executives present at the meeting have also committed to implementing the reforms vital to reactivate the economy and create jobs in a country with the highest unemployment rate in the euro zone at just under 20 percent.

He also suggested speeding up the reform of Spain's pension system, which he said last week he was committed to presenting to parliament in the first quarter. "But if it can be in the first half of the first quarter, even better" he said on Saturday.

The government resisted pressures to announce new austerity measures on Friday despite uncertainty pushing up debt costs, but offered concessions to help calm jittery markets.

The Bank of Spain said it would implement extra health checks on Spanish banks next spring, while Economy Minister Elena Salgado said the government would publish monthly updates on progress with its public debt.


Spain's borrowing costs have soared as investors sell off its sovereign bonds on concerns its high deficit and debt-laden banks could force it to follow Greece and Ireland in seeking a financial bailout.

Ireland entered the final hours of negotiations for emergency EU and IMF loans on Saturday with attention focused on the interest rate its taxpayers will be forced to pay to bail out their government and their banks.

The premium investors demand to hold Spanish government bonds rather than benchmark German debt hit a euro-era high of 274 basis points on Friday.

Zapatero said the government-driven consolidation process undertaken by the country's savings banks will be completed within a month.

"The savings bank sector association representatives and the heads of those savings banks present at today's meeting have confirmed the mergers are on track and by Dec. 24 the process will be definitively completed" he said.

On Friday, the Bank of Spain urged the unlisted regional savings banks, which were hit hard when a property bubble burst, not to delay mergers to cut their numbers to 20 from 45.

Company heads at Saturday's meeting include Spain's top two bankers, Santander's Emilio Botin and BBVA's Francisco Gonzalez, as well as Spanish oil major Repsol YPF's chairman Antoni Brufau and Telefonica's Cesar Alierta.

Zapatero said they plan another meeting in two to three months.

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