Spain Hesitates on Aid as European Finance Ministers Meet

Prime minister reluctant to commit to conditions that include cutting pensions, health care

Prime Minister Mariano Rajoy of Spain continued to hold off in requesting a bailout for the country’s banks, citing lower interest rates in the wake of the European Central Bank’s (ECB) decision to commit to unlimited bond purchases.

As eurozone finance ministers gathered in Nicosia, Cyprus, for a meeting to discuss, among other things, Spain’s potential need for aid, Rajoy has held back, and said earlier in the week that he would not allow the European Union to decree how much could be spent on such necessities as pensions and health care.

Bloomberg reported Friday that Rajoy said there was no rush to request a bailout, which would come with tough conditions, now that the ECB has said it will buy bonds. That action drove down the interest rates that have been so crippling to Madrid, and Rajoy says he hopes that lower rates will make it possible for Spain to avoid a bailout altogether.

However, finance ministers were preparing to discuss not just Spain’s needs, but Greece’s as well. They were preparing to hear a report from the troika made up of the European Commission (EC), the ECB and the International Monetary Fund (IMF), who have been preparing data on Greece’s financial situation in advance of a decision on whether to release the next tranche of funding in its bailout.

Worried that too much hesitation on the part of the Spanish leader will lead to a resumption in the markets of skyrocketing interest rates, and reluctant to extend too much lenience to either Madrid or Athens, individuals in the group have expressed everything from determination to concern.

“Europe is stabilized,” Finance Minister Maria Fekter of Austria said in the report. “We’ll be equipped to deal with all phenomena that come along.”

Finance Minister Jan Kees de Jager of the Netherlands took a hard line before the meeting began, saying in the report, “If there will be support, there will be conditions. Spain is on the right way, but they have to continue to convince the markets that they have a sound policy.”

Reuters reported that Finance Minister Michael Noonan of Ireland said, "I'd like them to set out their position because it hasn't been clear over the summer what their position is." Noonan voiced the concern of several countries in the bloc that Spain’s hesitation was jeopardizing a comeback from the debt crisis.

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