Keep Your Bailout! Why Spain Doesn’t Want Help (For Now)
It has been a busy few weeks for investors trying to decipher where the European debt crisis is headed.
Starting with May’s elections in Greece, presidential voting in France and a referendum in Ireland last week, markets can hardly keep up with the ricochet of political knife edges and economic speculation gripping markets and driving up bond yields.
Now the focus has turned to Spain, where the debt crisis recently forced sent Liberbank, Ibercaja and Caja 3, who together hold toxic real estate assets valued at around €11.8 billion ($14.8 billion), into merger talks.
This is on top of the country’s second largest bank, Bankia, last month asking for €19 billion ($23.7 billion) in bailout funds from Madrid. Estimates put the total needed to ward off the country’s impending banking crisis at €80 billion ($100 billion), fuelling speculation over the last week Spain was on the cusp of following Ireland, Greece and Portugal and approaching the European Union for help.
Indeed on Tuesday, Spanish Treasury Minister Cristobal Montoro spelled out just how desperate the situation had become.
“The risk premium says Spain doesn’t have the market door open,” he told Onda Cero radio, according to Reuters.
“The risk premium says that as a state, we have a problem in accessing markets, when we need to refinance our debt.”
But on Wednesday, Economy Minister Luis de Guindos threw a curve ball, announcing after talks at the European Commission that he had no immediate plans to apply for a European Financial Stability Facility bailout.
He added that any decision would have to wait until the results of an investigation by International Monetary Fund, as well as a study by an independent consultant in the banking sector, are released later this month.
The reaction in many quarters has been one of surprise.
The negative comments have also been flying thick and fast, with several chiding what they perceive as a suicidal rejection of aid.
“This is kamikaze politics, pure and simple.”
In May, Der Spiegel also reported that German Chancellor Angela Merkel had pressed Spanish premier Mariano Rajoy to take money from the EFSF.