Bloomberg News

Spain’s Guindos Urges Swift Adoption of EU Summit Decisions

July 01, 2012

Spain’s Economy Minister Luis de Guindos said a swift adoption of decisions to foster a banking, fiscal and political union made at last week’s European Summit would help reduce the country’s borrowing costs.

“Decisions were taken that will have a fundamental role in the short term to lower spreads,” de Guindos said during a conference in Navacerrada, near Madrid, today. “It is fundamental that these decisions be concretely implemented in the next weeks and months to show the fiscal policy is more and more coordinated and more compatible with the monetary policy.”

Spain’s 10-year borrowing costs last month surged above 7 percent for the first time since the euro was created after Prime Minister Mariano Rajoy’s government, in power since December, said the euro area’s fourth-biggest economy needed European aid to shore up banks burdened by bad loans.

The nation, in the throes of its second recession since 2009, was granted as much as 100 billion euros ($127 billion) of loans from European rescue funds on June 9 to recapitalize its banking sector as it works to shrink the third-biggest budget deficit in the euro area.

Benchmark Bond

The yield on Spain’s 10-year benchmark bond fell 61 basis points on June 29 to 6.33 percent following the summit in Brussels that started on June 28.

“The decision was taken to progress in a decisive way regarding the banking union, the fiscal union and the political union,” de Guindos said.

“Fundamental decision have been taken and will be taken regarding the centralization of supervision, the possibility of a European deposits guarantee fund, and of direct capital injections to banks by European instruments,” he said.

European Union leaders sparked the biggest rally in Spanish bonds and the euro this year after addressing flaws in bailout programs, moving toward a banking union, and trying to break a negative loop between troubled sovereigns and lenders.

The euro’s guardians agreed to drop a requirement that taxpayers get preferred creditor status on emergency loans to Spanish banks. Other steps included agreeing to use rescue funds to stabilize markets in certain conditions.

“The summit was an essential one, and that reinforced the message that we will all be behind the euro, that it is a common, irreversible and irrevocable project,” de Guindos said. The message is this is “a project to which we must all contribute and show solidarity, as has already occurred in the past,” he said.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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