ECB doesn't object to Spain using debt to fund Bankia

Date: Monday 28 May 2012

Spain has already been in 'close consultation' with the European Central Bank (ECB) as it prepares plans to be able to fund the 19bn-euro bailout of Bankia.

Madrid is expected to have to issue debt in order to be able to recover the funding costs and according to sources cited by Reuters the ECB has no objection to this procedure as it has previously been done by both Germany and Ireland.

Spain has yet to officially announce how it plans on coming up with the funds.

With regard to the central bank, ECB executive board member José Manuel González-Páramo feels that the best course of action is to talk as little as possible about what the monetary authority should do.

In an interview with the Spanish news agency Efe, he explained that this course of action is necessary “in order to preserve (the central bank’s) independence. The ECB has already been active with interventions in Spain’s case, especially if you consider that it was the country that benefitted the most from the three year liquidity operations (LTROs).”

SB

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