1. Business

Spain bailout not imminent

Published Oct. 6, 2012

BRUSSELS — A possible bailout for Spain is not imminent, a European Union official said Friday, as concerns grow over the country's ability to reach its deficit-reduction targets.

There's no guarantee that Prime Minister Mariano Rajoy will ask for aid from the EU rescue funds and he's facing a challenge to deliver the budget-deficit cuts pledged, the aide, who asked not to be named by Bloomberg News, told reporters in Brussels.

While European Central Bank President Mario Draghi said Thursday that the ECB is ready to start buying bonds of sovereigns that qualify for aid, officials from Spain, Germany and now the EU have dampened expectations of a rescue this week. Rajoy on Tuesday denied reports that a rescue request would come this week. Economy Minister Luis de Guindos on Thursday night said no bailout was needed.

There's "a potential slowdown in Spain's application for a European program," Thomas Costerg, an economist at Standard Chartered Bank in London, said by email. "There is a rising fear that the 2013 budget and the stress tests may have been some sort of window dressing to get European assistance."

Spain's 2013 budget assumes the economy will shrink 0.5 percent, less than the 1.3 percent median contraction predicted by 21 analysts surveyed by Bloomberg. Luis Maria Linde, the Bank of Spain governor, said targets were "certainly optimistic" in testimony to the parliament's budget committee.

Deputy Finance Minister Fernando Jimenez Latorre said a larger-than-expected contraction next year won't affect Spain's ability to meet its budget commitments. Spain is still analyzing the possibility of asking for a bailout, he added.