As Pressures Build For Spain To Ask For Aid, Germany May Be Encouraging The Country To Wait

Tuesday, October 02, 2012 09:00
edit
As Pressures Build For Spain To Ask For Aid, Germany May Be Encouraging The Country To Wait

Tags: European debt | European zone | world economy

In a twist in the Spanish debt crisis saga, it appears that Spain may not be the one waiting to ask for aid.
 
It may be that pressure to wait is coming from an external source: Germany.

This Website Is For Financial Professionals Only


 
Wide speculation has been that Spain’s Prime Minister Mariano Rajoy was waiting for the October 21st elections to pass before requesting aid. Rajoy has wanted to avoid the political stigma of having to ask for aid.
 
A senior Eurozone source says that requesting aid is the fastest way for Spain to lose access to the credit markets and would force a full country bailout.
 
The 43 structural reforms Spain has promised to institute over the next six months goes beyond the time the European Commission (EC) has asked of Spain.
 
France and Italy are pushing Spain to ask for aid but Germany says Spain is taking all the right steps for fiscal reform and does not need aid.
 
A senior German source said it does not make sense to present major decisions on Greece, Cypress, and possibly Spain to the Bundestag one-by-one. Brussels is also wary of giving aid to Spain before it falls to the brink of being forced out of the market, feeling that would set off a wave of contagion that would spread to other Eurozone states.
 
Germany has tended to do 180 degree turns on offering aid, causing Spain to fear it also could end up being shut out of the markets with stringent fiscal mandates.
 
Financial markets were strengthening a bit in hopes that Spain would go ahead and request the bailout. Spain’s need to refinance €29 billion by the end of October, including €9 billion in short-term debt has some saying Spain will ask for aid by the weekend of October 5.

Comments (0)

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy