Economy & Finance

Spain does not need European help for now, says PM

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MADRID (Reuters) – Spanish Prime Minister Mariano Rajoy said on Friday that Spain did not need to tap for now the European Central Bank’s bond-buying program for troubled euro zone governments but did not rule out asking for aid in the future.

Rajoy has faced pressure from Spain’s international partners — including the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) — to seek a European Union bailout. He has resisted so far, helped by an easing of the euro zone debt crisis.

“We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market,” he said at a news conference in Madrid. “But we can’t rule it out in the future.”

Rajoy has been able to delay a rescue because the ECB’s pledge to intervene in the market and support Spanish bond prices has brought down Spain’s borrowing costs since the summer.

He praised the ECB’s move on Friday.

“I think it has been a very significant decision. It has had a calming effect on the markets,” he said.

But Rajoy’s delaying tactics are risky at a time when the Spanish economy is contracting sharply, with 25 percent unemployment. Some market commentators believe Spain’s finances could spiral into chaos if it is forced to seek a bailout due to a sudden deterioration in bond markets.

Spain’s country risk, the premium bondholders demand to buy Spanish 10-year benchmark bonds over German benchmarks, was around 400 basis points on Friday, well off highs of above 600 in July.

Rajoy warned Spaniards of a tough year ahead, especially the first half, but said he hoped to see some improvement in the second half of 2013.

(Reporting by Sonya Dowsett and Clare Kane- Editing by Roger Atwood)

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