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Salgado denies need for a rescue package

Tue 9th Aug 2011

Earlier today Spain's Minister for Finance and the Economy, Elena Salgado, ruled out the need for a rescue package to avert a sovereign debt crisis even as ECB intervention kept a spiralling debt at bay.

"Declarations from all the institutional representatives are the same, that Spain and our fundamentals are very far from needing a rescue, that what there is is instability in the debt markets," The Minister commented in a radio interview.

Pressure on Spanish bonds eased again today following the ECB's intervention in the market as part of efforts to control the eurozone debt crisis.

As the market opened, the rate of return demanded by investors in the Spanish 10-year bond stood at 4.983%, dropping from 5.138% at the close of business yesterday. "The debt market has stabilised in Europe this morning and that has been good news," Salgado said.

The Minister also emphasized how Spain's public debt, standing at 63.6% of GDP, is way under the EU average of 80% of GDP.

However the markets are concerned that Spain's annual public deficit, coming in at 9.2% of GDP for 2010, was far in excess of the EU's 3% limit. The government has promised to cut the deficit to 6% of GDP this year, 4% next year and 3% the following year, but many analysts see this as overly optimistic.

A European 'Crisis meeting' is due to be held during early September, where EU leaders will discus the situation.

She defended the proposals that were announced over the weekends to raise Ä4.9 billion this year by changing the schedule of advance tax payments by large corporations, and by making savings in the Health Service by undertaking to purchase generic pharmaceuticals as opposed to expensive brands.

The Spanish public had their tax for the year withheld in monthly instalments, and it is therefore reasonable to request that larger corporations do likewise, she said.

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