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Spain's Prime Minister Seeks to Reassure Markets Rescue Fund Is Sufficient, Spain’s Leader Asserts
(about 5 hours later)
MADRID — The Spanish prime minister, Mariano Rajoy, sought to reassure markets Thursday that Spain could meet the financial obligations of its troubled regions, despite word from Valencia that it would require €1 billion more in rescue money than it requested in July. MADRID — The Spanish prime minister, Mariano Rajoy, sought to reassure markets on Thursday that Spain could meet the financial obligations of its troubled regions despite word from Valencia that it would require 1 billion more euros in rescue money than it requested in July.
Valencia’s unexpected plea for more money raised its total request to €4.5 billion, or $5.6 billion. But Mr. Rajoy said he was “not surprised” that the regions needed financing, and insisted that the €18 billion rescue fund the central government had set up would be sufficient to cover all the regional requests. Valencia’s unexpected plea for more money raised its total request to 4.5 billion euros, or $5.6 billion. But Mr. Rajoy said he was “not surprised” that the regions needed financing and insisted that the 18 billion euro rescue fund the central government had set up would cover all the regional requests.
So far, three of Spain’s 17 semiautonomous regions have said that they will need money from the fund. The total requested so far is about €10 billion, including the €5 billion Catalonia asked for this week. Some other heavily indebted regions are also expected to tap the fund, among them Andalusia, Spain’s most populous region. So far, three of Spain’s 17 semiautonomous regions have said that they will need money from the fund. The total requested so far is about 10 billion euros, including the 5 billion euros that Catalonia requested this week. Some other heavily indebted regions are also expected to tap the fund, among them Andalusia, Spain’s most populous region.
The regions, plagued by the recession afflicting the Spanish economy, and in many cases by their own budget deficits, have been shut out of the credit markets. They now need help from Madrid to meet their debt refinancing obligations, as well as to pay suppliers of health and other basic services. The regions, plagued by the recession afflicting the Spanish economy, and in many cases by their own budget deficits, have been shut out of the credit markets. They now need help from Madrid to meet their debt-refinancing obligations, as well as to pay suppliers of health and other basic services.
Mr. Rajoy spoke after meeting with François Hollande, the president of France. Both leaders underlined their commitment to cleaning up their countries’ finances as well as salvaging the euro currency bloc. “We are committed to the irreversibility of the euro,” Mr. Hollande said. Mr. Rajoy spoke after meeting with President François Hollande of France. Both leaders underlined their commitment to cleaning up their countries’ finances as well as salvaging the euro currency bloc. “We are committed to the irreversibility of the euro,” Mr. Hollande said.
Looking ahead to a meeting next Thursday of the European Central Bank’s Governing Council, Mr. Hollande also noted that European Union leaders had agreed to grant the central bank power to intervene in the financial markets “in exceptional circumstances.” Looking ahead to a meeting next Thursday of the European Central Bank’s governing council, Mr. Hollande also noted that European Union leaders had agreed to grant the central bank power to intervene in the financial markets “in exceptional circumstances.”
Other than Germany, which is divided on the issue, most euro zone nations are pressing for the E.C.B. to buy governments’ bonds, when necessary, to help reduce their borrowing costs. Both Mr. Hollande and Mr. Rajoy said Thursday that the euro zone needed to moderate the large divergences in euro zone members’ borrowing costs that had developed over the course of the euro debt crisis. “We have to end this situation in which countries finance themselves at zero percent and others at very high rates,” Mr. Rajoy said. Other than Germany, which is divided on the issue, most euro zone nations are pressing for the central bank to buy governments’ bonds, when necessary, to help reduce their borrowing costs. Both Mr. Hollande and Mr. Rajoy said on Thursday that the euro zone needed to moderate the large divergences in euro zone members’ borrowing costs that had developed over the course of the euro debt crisis. “We have to end this situation in which countries finance themselves at zero percent and others at very high rates,” Mr. Rajoy said.
Asked whether Spain’s commitment to meeting its deficit targets might require further action, despite signs of a deepening recession, Mr. Rajoy would say only that he hoped to avoid resorting to further increases in income and sales taxes in next year’s budget.Asked whether Spain’s commitment to meeting its deficit targets might require further action, despite signs of a deepening recession, Mr. Rajoy would say only that he hoped to avoid resorting to further increases in income and sales taxes in next year’s budget.
“I hope that we will not have to take decisions as difficult as those that we have taken in the first months of this administration,” he said. “I have had to take decisions that I would not have done in normal circumstances.”“I hope that we will not have to take decisions as difficult as those that we have taken in the first months of this administration,” he said. “I have had to take decisions that I would not have done in normal circumstances.”
Mr. Rajoy’s Popular Party will soon face a new electoral challenge. Two Spanish regions, the Basque Country and Galicia, announced that they would hold early regional elections, on Oct. 21.Mr. Rajoy’s Popular Party will soon face a new electoral challenge. Two Spanish regions, the Basque Country and Galicia, announced that they would hold early regional elections, on Oct. 21.
But Mr. Rajoy said those elections would have no bearing on Spain’s handling of its financial crisis. “The only thing that worries me are the general interests of the country,” he said.But Mr. Rajoy said those elections would have no bearing on Spain’s handling of its financial crisis. “The only thing that worries me are the general interests of the country,” he said.