Finnish PM says Spain borrowing cost is 'unfair'

AFP, Tuesday 11 Sep 2012

Finland backs Spain in its financial struggle, saying it will not push for a full sovereign bailout

Finnish Prime Minister Jyrki Katainen Tuesday backed Spain in its "unfair" financial crisis and said he would not pressure it to seek a full sovereign bailout.

Katainen, addressing a Madrid economic forum before meeting with Prime Minister Mariano Rajoy, said he did not like to speculate whether Spain would need a bailout like Greece, Portugal and Ireland.

"We all must concentrate on opportunities to avoid extra bailout packages and I think we can work so that the euro area can support all countries to solve their own problems. We still have lots of opportunities," he said.

With economists warning that Spain will need a full-blown bailout from its European partners, Rajoy said on Monday that he would not be rushed into a deal or surrender key powers over the budget.

Katainen, a strict defender of fiscal discipline who was a tough player in July negotiations for a eurozone rescue loan to Spain's banking sector, said he would not dictate to Rajoy what areas to make cuts in.

"I will not advise Prime Minister Rajoy on anything but I'm interested to hear his assessment of the situation and how we can go forward together," Katainen said.

Scrambling to rein in Spain's borrowing costs, Rajoy has announced tens of billions of euros in savings measures including pay cuts and tax rises that have sparked mass street demonstrations.

"I fully agree that the situation is unfair. Spain would deserve lower interest rates after having done that many austerity measures and especially structural reforms which will strengthen competitiveness," Katainen said.

"I believe very strongly that after the measures the government has already done here in the Spain and that the government has promised to do in the next few years the Spanish economy will be very competitive," he added.

"It just takes some time."

He urged tighter European Union integration and bloc-wide banking supervision.

"We have to devise a way of stabilising the panicking sentiment in the financial market in order to give more time to countries themselves but also in order to give more time to financial markets, lenders, to assess what each individual country has already done," he said.

"It is not fair that whatever the countries are doing, nothing seems to be enough."

On Monday in his first television interview since taking power in December, Rajoy said he would not accept any bailout that dictated spending cuts or touches old-age pensions.
Despite a deepening recession, a jobless rate of nearly 25 per cent, steep borrowing costs and huge debt repayments due this year, he said he would refuse to touch pensions or make further increases in value added tax.
The European Central Bank said last week it would buy government bonds to lower distressed states' borrowing costs but only in return for strict conditions set by eurozone bailout funds.
Rajoy said he was still reflecting and had not decided whether Spain would formally request such bond purchases or a bailout.
The ECB announcement alone slashed Spanish borrowing costs on the financial markets and Rajoy's declarations may feed concerns that Madrid will try to delay or even avoid a bailout.
The Madrid stock exchange was down by 0.88 per cent in late morning trade on Tuesday.

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