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Spain takes its time over rescue

Spain takes its time over rescue
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Spanish Prime Minister Mariano Rajoy is playing his cards close to his chest. While in New York, visiting the UN, he did not announce anything relevant to his austerity budget for next year, or say whether he will ask the euro group for financial help.

His waiting procedure was touched on by the Spanish Economy Minister Luis de Guindos on Saturday. He said Madrid was going to take its time before requesting a rescue, which would carry conditions of which the Spanish ruling Partido Popular (PP) is very wary.

De Guindos said: “Spain will do what has to be done, without haste, knowing what we know about this sort of operation.”

Social tension and the political programme currently engaged make any decision risky for the PP’s position.

Regional elections have been moved up in Galicia and the Basque Country to 21 October, and in Catalonia to November 25.

Rajoy is worried that losses in the PP fiefdom of Galicia could weaken his hold on the leadership of the party. He took a resolute stand defending his policies, at a gathering of the faithful in Orense.

Rajoy said: “I want you to know that what we are doing, which is not easy, takes a long time and doesn’t provide immediate results; it is what needs to be done. It is exactly the opposite of what was done in the past – which brought us to where we are today.”

The economy has continued to unravel since Rajoy won top office in February. In recession now, Spain’s GDP is dropping significantly, the Central Bank says. Rajoy’s government raised VAT from 18% to 21% this month, dragging on consumer spending and weakening Madrid’s hopes of reducing the public deficit.

At the end of August that had reached 4.77% of GDP. The goal for the end of the year is 4.5%.

At the same time, the debt markets are never patient for long, and with each day that passes without a Spanish decision on financial aid, the more Madrid can expect to pay for what it has borrowed.