Spain, Italy suffer most from Greek debt crisis: Madrid
Spain and Italy are taking the hardest hit from Greece's sovereign debt crisis but Madrid will not need a bailout, Spanish Finance Minister Elena Salgado said Monday.
The risk premium charged on Spanish bonds compared with safer-bet German securities “is rising, it is under enormous tension,” she said in an interview with public television TVE.
“All eurozone nations are facing this tension but Italy and Spain are at the moment the two countries which are suffering most from this tension,” she added.
The spread between Spanish and German 10-year debt hit 2.814 percentage points on Monday, flirting with a peak of 2.83 percentage points on November 30 when markets fretted over Portugal and Spain’s solvency.
Further tensions could promptly push the risk premium it over 3.0 percentage points, Salgado said, noting that the government has had no problems raising money on the debt markets.
“Spain is financing itself very well,” Salgado said, adding that demand for government bonds always outstripped supply by about four times.
“Therefore we are not, nor will we be on the brink of any bailout.”
Spain’s accumulated public debt amounted to 679.78 billion euros ($970 billion) or 63.6 percent of Gross Domestic Product at the end of the first quarter, up from 55 percent a year earlier and its highest level since 1988.
But the country’s debt level is still relatively low compared to its euro zone neighbours — the average debt-to-GDP ratio of the 17 eurozone countries stood at 85.1 percent at the end of 2010 — and it trails the levels reached in Greece, Ireland and Portugal, all three of which have required EU-IMF bailouts.
The Greek government must this week push harsh austerity reforms worth an additional 28 billion euros through a divided parliament — on top of sweeping cuts last year.
Without approval for the measures, the European Union and International Monetary Fund say they will not disburse the fifth tranche of Greece’s 110-billion-euro bailout programme.
Athens needs the 12 billion euros to pay its bills next month. The prospect that Greece could become the first eurozone nation to default on its debt has raised concerns over other heavily indebted European nations.
Salgado rejected any comparison to the three eurozone nations which have had to ask for European Union-International Monetary Fund bailouts.
“We don’t have the problems of Ireland and its financial sector, or the problems of Greece with the deficit which they did not reveal, or the problems of Portugal with slow growth during many years and a weak export sector,” said Salgado.