Spain's Zapatero slams rumours of financial collapse

17th June 2010, Comments 0 comments

Spanish Prime Minister Jose Luis Rodriguez Zapatero on Thursday slammed what he called "all these unfounded rumours," referring to reports Madrid was preparing a request for bailout aid or that its banks were insolvent.

"There is nothing better than transparency to demonstrate solvency to give confidence and to leave behind us all these unfounded rumours," Zapatero said after highlighting a decision by all 27 EU leaders to follow the Bank of Spain's lead by making public stress tests on "all our finiancial institutions."

Zapatero's government has already denied persistent reports it would call on a trillion-dollar rescue fund of loans and guarantees set up by mainly eurozone partners in conjunction with the International Monetary Fund.

IMF chief Dominque Strauss-Kahn will visit Zapatero in Madrid on Friday, having described their planned talks as a "working visit."

Zapatero said that "people have said a lot about whether Spain would call on the Fund," but pointed out that rather than lodging any request for help, Madrid had "contributed to Greece, as a diligent member of the EU."

He said that followed a previous spate of rumours a few weeks ago, but stressed: "I did say then that people should bide their time, be patient, listen to what the Spanish government is saying and not listen to any rumours.

"Spain has shown great solvency in our financial system," he added. "We are one of the few countries that did not have to inject capital, we only had to rescue a couple of minor instututions."

French President Nicolas Sarkozy offered his support when he said there was "no problem" with Spain's finances. "We are showing full confidence in the Spanish authorities," he added.

Spain passed a critical loan test on Thursday by offering higher interest rates, raising 3.479 billion euros (4.305 billion dollars), towards the top end of its expectations.

Analysts said strong demand for the government bonds will reassure markets alarmed about the nation's finances.

That came after Zapatero's government on Wednesday passed crucial reforms of the rigid job market, also deemed essential for reviving the economy and fending off a Greek-style debt crisis.

© 2010 AFP

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