TOKYO (Reuters) – Spain on Friday said a European bond-buying plan was fully ready for use and that there was absolutely no political resistance from within the euro zone to a Spanish bailout request.
The situation in Spain, which is considering seeking an aid program to ease financing pressure, dominated talks between finance ministers at the International Monetary Fund and World Bank semi-annual meetings in Tokyo.
The country is the latest epicenter of the euro zone debt crisis, which started nearly three years ago, and investors believe it won’t be able to deflate a big budget gap, control soaring debts and reform its economy without outside help.
“The instrument is real, not virtual. Because it is real, it is ready to be used at any moment,” Spanish Economy Minister Luis de Guindos said, referring to the European Central Bank’s promise of unlimited bond-buying to help debt-stricken states.
However, he declined to say if and when Spain would request aid.
“The instrument is here. It is available. It is available in October, in November, in December … The ECB statement says clearly that the credit line is ready to be activated,” he told a group of reporters.
Senior euro zone sources told Reuters last week that Spanish authorities were ready to make a request and trigger the ECB program, but that Germany had signaled it should hold off.
Asked if Spain was pressed not to request the bailout and if political resistance rather than a lack of technical details was blocking a decision, de Guindos said: “absolutely not.”
“There was no pressure, in one sense or in the other. Not at all,” he said, adding that the Spanish government would not be rushed into a decision by any external factor.
Spain’s debt is rated by Moody’s and Standard & Poor’s just one notch above junk territory. Both rating agencies have a negative outlook on the debt and analysts believe a new downgrade would have disastrous consequences for the country.
“We will not move depending on the rating agencies,” de Guindos said.
A senior euro zone source participating in high-level meetings in Tokyo said the “loss of time” on a Spanish request was not helping to keep financial markets calm.
“The sooner they ask the better,” the source said. “There is a game of chicken between Spain and Germany. Germany wants to be sure that Spain is serious about reforms before going to parliament and Spain wants to be sure that German lawmakers will sign off on the plan before it makes a request.”
With the IMF pushing for a softer deficit reduction path for struggling European economies such as Spain, Portugal and Greece, de Guindos said that a deepening recession could lead Spain to revise its nominal deficit targets, while leaving unchanged its structural deficit-cutting efforts.
“In early November, we will see what is the economic forecast of the European Commission and we will see… But in previous cases it has been evidenced that if you have a deeper recession, you need to maintain the structural adjustment but have a different nominal target.”
The European Commission will release its updated growth and deficit forecast for the European Union’s 27 member states on November 7.
Sources told Reuters the figures were likely to be in line with an IMF forecast of a recession in Spain of 1.5 percent next year, which contrast with Spain’s budget assumptions of a 0.5 percent contraction.
De Guindos declined to say if the government would revise its budget plans if the deficit targets had to be changed.
“We’ll see. We’ll see the forecast and we will analyze (the issue),” he said.
(Additional reporting by Jan Strupczeswki and Tomasz Janowski- Editing by Tim Ahmann)