Spain’s leader Sunday hailed a eurozone lifeline of up to 100 billion euros ($125 billion) to save its stricken banks as a victory for his nation and for Europe.
Despite flatly denying any need for a rescue just 13 days earlier, Prime Minister Mariano Rajoy insisted Madrid had not caved in; instead he had been pressuring for the aid. After an emergency video conference on Saturday, the 17 eurozone finance ministers said in a statement they they were “willing to respond favourably” to a Spanish plea for help.
“I am very satisfied, I think we have taken a very decisive step,” Rajoy, who had been criticised in the media for failing to appear earlier, told a news conference. “Yesterday, the credibility of the euro won, its future, and the European Union,” the prime minister argued. “It was not easy,” he conceded. “Nobody pressured me and I don’t know if I should say this, but it was I who pressured for a line of credit,” said Rajoy. The rescue loan for Spain — hailed by Germany, France, Japan and the United States as well as the IMF — marked a dramatic, public U-turn for Spain, which had hotly denied any need for outside aid.
But Rajoy sought to paint it as a sign of European confidence in his government’s reforms and austerity measures. “If we had not done what we have done in the past five months, the proposal yesterday would have been a bailout of the kingdom of Spain,” he declared. Now the deal was done, the prime minister said, he would be attending the Spain-Italy football match in Poland at the start of their Euro 2012 campaign later in the day. “If this situation had not be resolved, I would not be going,” he assured reporters. The eurozone debt crisis has now snared the bloc’s fourth-biggest economy — Spain’s is twice the combined size of those of Greece, Ireland and Portugal, the countries bailed out so far. Spain finally sought aid as its borrowing costs on the open markets soared and the price for fixing the banks’ balance sheets, heavily exposed to a property bubble that burst in 2008, spiralled. Recently nationalised Bankia, which has the largest exposure to real estate, needs an extra 19 billion euros to repair its books in addition to 4.5 billion euros already injected by the state.
Economy Minister Luis de Guindos told a news conference on Saturday that the loan of up to 100 billion euros did not amount to a rescue but Rajoy declined to be dragged into a semantic debate Sunday. A source close to the talks told El Pais it would cost three percent a year, about half the latest open market rate Spain has had to pay for fresh funds. The government highlighted the fact that the deal imposed no new austerity measures or restrictions on the broader economy. Nevertheless, eurozone ministers said they were confident Spain would honour commitments to cut the deficit and restructure the economy. “Progress in these areas will be closely and regularly reviewed,” they said in the statement.
Most of the Spanish newspapers’ front pages headlined with the word “Rescue,” although some sought so soften the blow. “Rescue without humiliation,” insisted the conservative daily El Mundo. Spain may yet be forced into seeking a full sovereign rescue when it has to face the question of financing its debt-laden regions, warned Edward Hugh, independent analyst based in Barcelona. “This could start from the autumn,” Hugh added. “This would officially be the bailout; they would find they could not manage it with a credit line so they would have to go for a bailout.” The eurozone hopes the rescue will satisfy financial markets and put Spain in a safe harbour ahead of the Greek elections on June 17, when there is a risk voters could turn against their bailout terms and force Athens into a destabilising exit from the eurozone
