Political News
FONT-SIZE Plus   Neg
Share SHARE
mail  E-MAIL

IMF, ECB Deny Spain Bailout Talks

IMF, ECB Deny Spain Bailout Talks
9/14/2012 9:52 AM ET

The International Monetary Fund and the European Central Bank have denied a newspaper report that suggested they are in talks over a EUR 300 billion bailout for Spain.

Friday, Dutch daily Her Financieele Dagblad reported without naming any sources that the two institutions were in deep negotiations regarding such a deal. The rescue would allow the ECB to buy Spanish bonds when the country's borrowings costs surge.

Speaking at a press conference at the Ecofin meeting held in the Cypriot capital of Nicosia, IMF Managing Director Christine Lagarde said, "I can assure you that we are not."

European Central Bank President Mario Draghi, Eurogroup Chief Jean-Claude Juncker and European Commissioner for Economic and Monetary Affairs Olli Rehn were also present in the press conference in Nicosia.

Separately, the ECB issued a statement denying the report. "The reporting is unfounded. No negotiations are ongoing. It would be up to the Spanish authority to decide to make a request," the central bank said.

Further, the ECB said its latest bond-buying plan known as the Outright Monetary Transactions (OMT), unveiled last week, was "a monetary policy initiative and cannot be made conditional to any negotiations." The bank also said it will consider OMT only "if the necessary external conditions are met."

According to the Dutch newspaper report, the ECB wanted to ensure IMF participation in any bailout for Spain. Such participation would entail strict conditions on Spain to implement spending cuts and economic reforms to secure aid, it added.

The Eurozone finance ministers meeting in Nicosia are likely to press Spain to seek a full bailout for its struggling economy. Thus far, Spain has resisted calls for a rescue request saying it does not require financial assistance. However, some of the country's 17 autonomous regions have sought rescue from Prime Minister Mariano Rajoy's government.

Meanwhile, the ECB's bond-buying plan announcement last week and the German Constitutional Court approval for ratification of the euro area permanent bailout fund ESM this week, have helped lower the borrowing costs for Spain and Italy.

Rehn said today that the Spanish government has assured that it is "ready to take the necessary action to meet its fiscal targets, which are certainly in reach."

It is essential to maintain the momentum in Spain with regard to fiscal policy and structural reforms, Rehn said. Further, the EU official said the Rajoy government has informed that it plans to adopt a "national reform programme by the end of September".

Regarding Greece, Eurogroup's Juncker said the troika report, which is prepared by the IMF, the European Commission and the ECB, is likely to be available only in the second half of October and decisions will be taken thereafter. The troika mission is visiting Athens at present.

Juncker also said he was reassured by the Spanish Finance Minister Luis de Guindos' comments that the government was willing to take more measures to attain the deficit targets.

IMF Chief Lagarde did not rule out giving more time for Greece to meet its fiscal targets. Citing the troika missions, she said there is good work underway in Greece and progress has been made in bridging the fiscal gap.

Though Greece has taken huge efforts, it has got to do a lot more on the fiscal consolidation front and structural reforms, Lagarde said. The country's debt sustainability targets are very high, she added.

Turning to Spain, Lagarde said the country has taken strong and wide-ranging reform measures. There has been important steps taken lately in the Eurozone, she noted, while welcoming the ECB's bond-buying plan.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Political News

comments powered by Disqus