The Governor of the Bank of Spain warned that Madrid’s financial forecasts are “optimistic” adding to the mounting pressure on Mariano Rajoy from European Central Bank and the International Monetary Fund.
Luis Maria Linde, who was appointed as Governor in May, said Madrid’s official forecasts seemed out of step internationally and there was risk of “slippage.”
He said that Spain needed to impose more austerity measures, on top of the billions of euros of cuts already announced, in order to meet the 2013 deficit target of 4.5pc of GDP.
“The information now available for the state up to August indicates there are risks of slippage on the goal fixed for this year,” he told a parliamentary committee.
“This outlook...is certainly optimistic in comparison with the outlook shared by the majority of international organisations and analysts.”
Mario Draghi, president of the ECB, renewed his offer to Spain to seek help by repeating that his bond buying programme, the Outright Monetary Transactions (OMT) was ready to step in. At a press conference where he announced a hold in interest rates, Mr Draghi directly addressed Mr Rajoy’s fear that aid would bring draconian austerity too.
He repeated that OMT could only be used to help countries that had agreed a programme with the bail-out funds, the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM) but that was not bad news for Spain.
“There is a tendency to identify conditionality with harsh conditions,” he said. “Conditions don’t need to be necessarily punitive. Actually many of the conditions have to do with structural reforms, which have both social cost, but also great social benefits.
And if they are well-designed, the second are going to be greater than the first.His comments clashed with Luis de Guindos, Spain’s finance minister, who insisted that the country “doesn’t need a bail-out at all.”
In a speech in London that was interrupted by anti-austerity protesters at one point, Mr Guindos said Spain was “doing its homework”.
He said it was “crazy” to suggest the eurozone would fall apart. Mr Draghi, who called for a rapid implementation of the fiscal compact to help steady markets, admitted that the ECB could only wait. “The decision [to apply for aid] is entirely in the hands of governments,” he said.
“The ECB has done what was possible and the OMT would create an environment which is conducive to reforms...but the initiative is in the hands of governments.” Christine Lagarde, head of the IMF, repeated her offer of assistance.
She told a French newspaper: “If Spain wants it, we could help in diverse ways, for example by simply auditing and monitoring reforms negotiated with its European partners without the IMF participating in financing.
But we could also play a role in financing.” Bond traders bet that a bail-out would come through and helped Spain raise €4bn in an impressively popular debt auction.
France raised €7bn of long-dated bonds at a lower rate than last time. Wolfgang Schaeuble, Germany’s finance minister, said the eurozone was making good progress, except Greece: “All of the countries which are in a programme, except Greece, which is in a particularly difficult situation... have made remarkable progress.
Even though they are not in a programme, what Spain and Italy have achieved is grand.” There was more anti-austerity rioting in Greece.
Meanwhile, Cypriot government is reportedly preparing a request for a €11bn bailout to prop up its banks and pay its bills. The talks continue on Friday with a meeting between the leaders of Italy, France and Spain on the sidelines of a summit in Malta.”
telegraph.co.uk
Luis Maria Linde, who was appointed as Governor in May, said Madrid’s official forecasts seemed out of step internationally and there was risk of “slippage.”
He said that Spain needed to impose more austerity measures, on top of the billions of euros of cuts already announced, in order to meet the 2013 deficit target of 4.5pc of GDP.
“The information now available for the state up to August indicates there are risks of slippage on the goal fixed for this year,” he told a parliamentary committee.
“This outlook...is certainly optimistic in comparison with the outlook shared by the majority of international organisations and analysts.”
Mario Draghi, president of the ECB, renewed his offer to Spain to seek help by repeating that his bond buying programme, the Outright Monetary Transactions (OMT) was ready to step in. At a press conference where he announced a hold in interest rates, Mr Draghi directly addressed Mr Rajoy’s fear that aid would bring draconian austerity too.
He repeated that OMT could only be used to help countries that had agreed a programme with the bail-out funds, the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM) but that was not bad news for Spain.
“There is a tendency to identify conditionality with harsh conditions,” he said. “Conditions don’t need to be necessarily punitive. Actually many of the conditions have to do with structural reforms, which have both social cost, but also great social benefits.
And if they are well-designed, the second are going to be greater than the first.His comments clashed with Luis de Guindos, Spain’s finance minister, who insisted that the country “doesn’t need a bail-out at all.”
In a speech in London that was interrupted by anti-austerity protesters at one point, Mr Guindos said Spain was “doing its homework”.
He said it was “crazy” to suggest the eurozone would fall apart. Mr Draghi, who called for a rapid implementation of the fiscal compact to help steady markets, admitted that the ECB could only wait. “The decision [to apply for aid] is entirely in the hands of governments,” he said.
“The ECB has done what was possible and the OMT would create an environment which is conducive to reforms...but the initiative is in the hands of governments.” Christine Lagarde, head of the IMF, repeated her offer of assistance.
She told a French newspaper: “If Spain wants it, we could help in diverse ways, for example by simply auditing and monitoring reforms negotiated with its European partners without the IMF participating in financing.
But we could also play a role in financing.” Bond traders bet that a bail-out would come through and helped Spain raise €4bn in an impressively popular debt auction.
France raised €7bn of long-dated bonds at a lower rate than last time. Wolfgang Schaeuble, Germany’s finance minister, said the eurozone was making good progress, except Greece: “All of the countries which are in a programme, except Greece, which is in a particularly difficult situation... have made remarkable progress.
Even though they are not in a programme, what Spain and Italy have achieved is grand.” There was more anti-austerity rioting in Greece.
Meanwhile, Cypriot government is reportedly preparing a request for a €11bn bailout to prop up its banks and pay its bills. The talks continue on Friday with a meeting between the leaders of Italy, France and Spain on the sidelines of a summit in Malta.”
telegraph.co.uk
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