Spain can't finance itself if yields stay elevated, says PM

By Benjamin Chiou

Date: Wednesday 27 Jun 2012

Spain cannot continue paying sky-high yields on the sovereign debt market for much longer, according to the country’s Prime Minister Mariano Rajoy.

“The most urgent subject is the subject of financing […] We can't finance ourselves at the prices we are paying for very long," he told Spain’s Congress on Tuesday.

Spanish 10-year debt was yielding 6.937% as of 15:19 on Wednesday, up 6.5 basis points on the day. The borrowing rate on these securities surpassed the key level of 7% earlier this month, hitting a high of 7.25% - a level seen by many as unaffordable and unsustainable

“I will propose measures to stabilise financial markets, using the instruments at our disposal right now,” he said, referring to European Central Bank’s (ECB’s) bond-buying programme.

"There are institutions and also financial entities that cannot access the markets. It is happening in Spain, it is happening in Italy and it is happening in other countries," he said.

On Monday, Spain’s Ministry of Economy formally announced its request for 'financial assistance for the Spanish banking system' in a letter sent to Eurogroup President Jean-Claude Juncker.

In the copy of the letter published by the Ministry, Luis de Guindos did not give a specific amount requested. However, the Eurogroup already approved providing "up to €100bn" in funds, while the independent consultancies Oliver Wyman and Roland Berger said last week that the country’s banks would not need more than €62bn in additional capital.

BC

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