22nd Oct 2016

Spain in wait-and-see mode as recession worsens

  • Spain's PM Mariano Rajoy claims deficit-cutting measures will convince the markets (Photo: Partido Popular de Cantabria)

Spanish Prime Minister Mariano Rajoy on Tuesday (28 August) said his government has not yet taken a decision on asking for European help in refinancing its debt, pending a key meeting of the European Central Bank next week.

Speaking alongside EU council chief Herman Van Rompuy, who interrupted his vacation in Spain to meet the Prime Minister, Rajoy re-stated his commitment to "take all necessary measures" to get the country out of the worsening crisis.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"We've already taken complicated, painful decisions, but they were required in this situation. We have to lower our public deficit, we can no longer continue in this situation where refinancing is so difficult," he said.

Fresh data published on Tuesday by the country's statistics office showed that recession is now at 1.3 percent of GDP, compared to previous estimates that suggested the economy would contract by one percent.

On the same day, the country's most economically important region, Catalonia, said it would need a €5 billion bailout from the central government to refinance its debt.

Rajoy brushed off questions about the sustainability of the country's public finances and said Catalonia was not the first region to be bailed out.

Yet the worsening data and the soaring borrowing costs for both the central and the regional governments have fuelled speculation that Spain will need a bigger bailout, on top of the €100bn earmarked for its troubled banks.

Rajoy said there were "no negotiations, because we have not submitted any request". But he also said that "it is the government's duty to serve the interests of Spanish citizens and this is the basis for all our decisions."

EU officials in Brussels do not expect any request to be made before a key ECB meeting on 6 September. ECB chief Mario Draghi earlier this month announced that the bank may purchase bonds of countries who face "unacceptably" high borrowing costs, but only if those countries first make a formal request with the eurozone bailout fund (EFSF), which is authorised to draw up a reform programme.

An internal review within the ECB is due by 6 September on the practicalities of how this linkage can be made between a central bank - supposedly strictly independent from politics and governments - and a governments' bailout fund using taxpayers' money.

For his part, Van Rompuy also stressed it is up to the Spanish government to take a decision and formulate a request.

"If the financial markets' defiance persists and if Spanish authorities think it is useful, EU institutions, including the ECB, have expressed readiness to take appropriate action," he said.

The Belgian politician said he was convinced that "if and when used," the ECB tools will be "very effective."


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

News in Brief

  1. Canada and Wallonia end talks without Ceta deal
  2. Juncker hopes for Canada accord in 'next few days'
  3. Romania drops opposition to Ceta
  4. Difficulties remain on Ceta deal, says Walloon leader
  5. Brexit could lead to 'some civil unrest' in Northern Ireland
  6. ECB holds rates and continues quantitive easing programme
  7. Support for Danish People's Party drops, poll
  8. Spain's highest court overturns Catalan ban on bullfighting

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EASPDJoin the Trip! 20 Years on the Road. Conference & Photo Exhibition on 19-21 October
  7. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  8. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  9. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  10. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  11. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  12. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity