PM Zapatero says no chance Spain will need bailout

By Ciaran Giles

Associated Press

Published: Friday, Nov. 26 2010 8:15 a.m. MST

MADRID — Prime Minister Jose Luis Rodriguez Zapatero said Friday there was no chance Spain would seek a bailout.

Asked in an interview on Spain's RAC 1 radio if he ruled out financial help from the European Union, Zapatero said "absolutely."

He said Spain's plans to reduce its deficit were on track and that its total debt was still 20 percentage points below the European average.

"The deficit reduction plan is being fulfilled scrupulously, we have one of the most solid financial systems, the savings banks are restructuring at a good rate and should be consolidated by the end of the year," he said.

Investors have long expressed concern over Spain's savings banks — or "cajas" — which were heavily exposed to Spain's collapsed real estate sector and are now saddled with billions of euros in foreclosed property. They are currently under a consolidation process scheduled to finish next month.

Zapatero said he had asked the country's central bank to report periodically on the health of the financial sector.

"It's not that I'm transmitting confidence because I want to, but because of concrete data," he said.

Zapatero said that people who suggested the country will need a bailout are not helping to calm matters, adding that investors who were betting short term in Spain were "making a mistake."

The markets were not convinced, however. The yield on Spain's 10-year bonds rose to nearly 5.2 percent Friday.

Germany's 10-year bonds, a benchmark of lending safety, stood at 2.7 percent, bringing the spread against the Spanish bonds to 249 basis points, among its highest since the euro was introduced in 2002.

Madrid's Ibex 35 bourse continued its weeklong downward trend, dipping 1.89 percent by mid-afternoon.

Spain is struggling to recover from nearly two years of recession with unemployment at a euro-zone high of almost 20 percent.

Third-quarter GDP growth was flat, after two quarters of timid growth, although the third quarter figure was up 0.2 percent on a year-on-year basis — the first such rise in seven quarters.

The prime minister has insisted Spain has seen the worst of the crisis and is to meet with the chiefs of Spain's 37 top companies Saturday to discuss how to kick-start a revival of the economy.

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