Shaken Spain Seeks To Restore Confidence

Spain’s centre-right government, shaken by last week’s fall in Spanish sovereign bond prices and the stock market after its first budget, has signalled an immediate drive to restore confidence among investors and European leaders with further economic reforms, the Financial Times reported. Luis de Guindos, the economy minister and Spain’s de facto international spokesman on the eurozone sovereign debt crisis, has said in interviews with local and foreign media that Spain does not need a bailout of the kind provided to Greece, Ireland and Portugal by the European Union and the International Monetary Fund. In an attempt to soothe bond investors and European investors unimpressed by last month’s budget, Mr de Guindos told Germany’s Frankfurter Allgemeine Zeitung that the government’s next step would be a reform of the health and education systems “that is, a rationalisation of spending in the autonomous regions”. Investors concerned about the central government’s ability to control spending in the 17 autonomous regions depressed Spanish bond prices last week, forcing up yields on the 10-year benchmark bond to more than 5.8 per cent and increasing the “risk premium” over German bunds by more than 4 percentage points or 400 basis points. Economists, meanwhile, were surprised that Cristóbal Montoro, the budget minister who presented €27.3bn of costs cuts and tax rises to parliament last week, put so much emphasis on reducing outlays on investment and so little on reducing the public sector bill for wages and pensions. Read more. (Subscription required.)