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Spain says won’t be next domino after Portugal

Published on 07/04/2011

Spain sought to distance itself from Portugal's request for financial assistance from the European Union, insisting it was not at risk of seeking a similar bailout of its battered economy.

“Spain is not at risk at all after Portugal has asked for a rescue,” Finance Minister Elena Salgado told Spanish National Radio (RNE).

She emphasized that the Spanish economy was “distinct” from Portugal’s as it is “larger, more diversified and more productive.”

Also, the Spanish government’s economic reforms are “deeper” and carried out “at a faster pace” than in Lisbon.

In another interview Thursday, with the private radio station Cadena Ser, Salgado said the government “absolutely rules out any possible contagion” of Spain from Portugal.

Portugal on Wednesday said it had finally decided to request financial assistance from the European Union, paving the way for a third bailout of a eurozone country after Ireland and Greece.

Analysts have said that Portugal could require a package worth 70 billion euros (100 billion dollars), compared with 85 billion for Ireland and 110 billion for Greece.

Salgado expressed solidarity with the Portuguese government over the crisis.

“Once Portugal has requested the bailout it can meet its commitments with greater ease,” she told RNE.

The pressures on Portugal had raised doubts about weaker eurozone members including neighbour Spain.

But Spain, which has enacted stringent budget cuts, and labour, pension and banking reforms so as regain market confidence, is determined not to be the next eurozone domino to topple.

Any such bailout would be bigger than those of Greece, Ireland and Portugal combined, possibly threatening the whole eurozone project.

The head of the IMF, France’s Dominique Strauss-Kahn, said in an interview published Wednesday in Spanish daily El Pais that Madrid has taken the correct financial steps and had no need for international aid.

“I don’t believe that the Spanish government needs any type of financial aid,” he said,

“I believe that the policies that the Spanish government has implemented, as much on the fiscal side as in the reform of pensions, the labour market or in banking, are the correct policies.”

Salgado announced on Wednesday that the government had cut its growth forecast slightly and revised upwards its predictions for unemployment but said it was still on track to bring its public deficit to within a EU limit by 2013.

She told a news conference that the economy would expand by 2.3 percent in 2012 instead of 2.5 percent as previously forecast and by 2.4 percent in 2013 from 2.7 percent due to higher prices for commodities like oil and an expected increase in eurozone interest rates.

For this year, the government kept its forecast for growth of 1.3 percent.

The unemployment rate, already the highest among industrialised countries, will hit 19.8 percent this year instead of the 19.3 percent previously forecast.

The Spanish economy contracted 0.1 percent in 2010 after shrinking 3.7 percent in the previous year following the collapse of a property boom that had fueled growth for more than a decade.