Germany unyielding as broken Spain pleads for EU bank rescue
Spain makes plea for EU aid for troubled banks
Spain has admitted for the first time that it can no longer raise money on the global markets or roll over its sovereign bonds, threatening to set off a dangerous escalation of Europe’s debt crisis.
By Ambrose Evans-Pritchard
05 Jun 2012
Premier Mariano Rajoy said the country is “in an extremely difficult situation” and called on Europe to stand by the mutual obligations of euro membership. “Europe must say where it is going and show that the euro is an irreversible project that is not in danger, that helps nations in difficulty,” he told Spain’s senate.
Treasury minister Cristobal Montoro confessed that Spain can no longer raise money. “The market is no longer open. The risk premium is telling us that Spain as a state has a problem accessing the market when we need to refinance our debt.”
Despite the pleas, Spain’s leaders are holding out against a formal EU-IMF rescue along the lines of loan packages for Greece, Ireland and Portugal, calling instead for EU action to recapitalise Spanish banks.
“The European instistutions must open up and help us facilitate bank recapitalisations,” said Mr Montoro. This would avoid stigma and shift Spain’s vast contingent liabilities onto the EU.
In words that sent shivers through chancelleries across Europe, he said that Spain’s economy is too big for the EU bail-out machinery. “Technically, we can’t really be rescued,” he said.