Spain says 'very far' from need of rescue

9th August 2011, Comments 0 comments

Spain is "very far" from any need of a financial rescue despite turmoil on the debt markets, Finance Minister Elena Salgado said Tuesday.

"Declarations from all the institutional representatives are the same, that Spain and our fundamentals are very far from needing a rescue, that what there is is instability in the debt markets," Salgado said.

The finance minister, speaking to radio station Onda Cero, stressed that Spain's public debt levels were 20 percentage points below the average of the European Union.

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 March. EU public debt was an average of 80 percent of GDP last year, well above the 60 percent ceiling.

Salgado said she believed that volatility in the debt markets would ease throughout August.

The risk premium on Spanish government bonds struck euro-era records last week but the bonds strengthened Monday and Tuesday on news that the European Central Bank was buying Spanish and Italian debt.

In early trade, the yield or rate of return earned by investors in the benchmark Spanish 10-year bond was at 4.983 percent, down sharply from 5.138 percent at the close Monday.

Debt markets are concerned about Spain's high annual public deficits combined with sluggish economic growth and an unemployment rate of more than 20 percent.

The central government aims to reduce the annual public deficit to 6.0 percent of GDP in 2011 from 9.24 percent in 2010. But some autonomous regions such as Catalonia have far surpassed targets imposed by Madrid, casting doubt on the national goal.

After 45 minutes of trade, the Madrid stock market's IBEX-35 index of leading shares was down 1.41 percent at 8,340.2 points. It had jumped more than two percent in opening trade but quickly ran out of steam.

© 2011 AFP

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