PARIS (MNI) – Spain has taken “very strong” measures to reduce its
deficit and improve its economy, and the government in Madrid has proven
it has “the political will” to make the reforms required to work its way
out of the debt crisis, European Central Bank Executive Board Member
Benoit Coeure said Wednesday.
Addressing the French Association of Corporate Treasurers, Coeure
noted that Spain’s unilateral decision to raise its 2012 deficit target
“had contributed to the situation” in markets, which he said “remains
fragile.” However, the country “has taken a number of measures,”
including new spending cuts, taxes and labor reform, and “there is no
reason” why they should not eventually be appreciated by the markets,
Coeure said.
Market anxiety about Spain’s ability to control its deficit amid a
deepening recession and record high unemployment has pushed yields on
Spanish sovereign debt sharply higher in recent weeks. The yield on
Spain’s 10-year bond climbed above 6% early Wednesday, after reaching a
low of 4.83% in February.
The Spanish government, hoping to assuage markets, announced a
draconian package of budget cuts totalling E27 billion earlier this
month, and added another E10 billion in health and education spending
cuts over the weekend. The government has also urged banks to speed up
mergers and consolidations, but many analysts believe that
recapitalizing Spanish banks will require tens of billions more than the
roughly E50 billion that Madrid has already announced.
Asked whether the ECB might intervene to help Spain should it
become necessary, Coeure answered indirectly. While the central bank has
not recently used its Securities Market Program (SMP) to buy bonds of
troubled countries in secondary markets, he noted that “it still
exists.”
— Paris newsroom; +33142715540; email: bwolfson@marketnews.com —
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