Spain’s condition for bailout: No dictation of spending cuts

MADRID - Agence France-Presse

Two people dressed up like grave diggers perform a funeral burying the Social Rights’ coffin during a protest called by several social collectives to demand decent social services and against the government’s cuts. AFP photo

Spain’s Prime Minister Mariano Rajoy has said he would not accept an economic rescue that dictates spending cuts or touches old-age pensions.

“I could not accept that they tell us which are the concrete policies in which we have to cut or not cut,” the prime minister said on Sept. 10 as the 17-nation eurozone’s fourth biggest economy lurched towards a bailout.

“If there is one area I won’t touch it is pensions because the pensioner is the most fragile person,” the 57-year-old leader said in his first television interview since taking power in December last year.
Even as Spain faced high long-term borrowing costs, about 30 billion euros ($38 billion) in debt repayments due in October, a deepening recession and a jobless rate of nearly 25 percent, he vowed not to be rushed.

‘Just like seeking a credit’

Rajoy told public television channel TVE that his conservative Popular Party government would carefully study the conditions of any sovereign bailout, just like any householder seeking a credit.

He spoke only four days after the European Central Bank said it would buy as many government bonds as needed on the open market to bring down a distressed state’s borrowing costs.

 But the ECB offer came with one string attached: first, the state must apply to the eurozone bailout funds for a rescue and submit to their strict conditions including IMF supervision.

“The ECB has taken a very important decision and logically the government has to study it very carefully and be cautious,” Rajoy said.

“We already know that if we request it they can give us the credit, which is very important.” But the Spanish leader said the conditions would have to be decided with the European Union, not the central bank.

 “I am not going to announce what the red lines are,” Rajoy said, renewing his promise to abide by Spain’s commitments to reduce the nation’s public deficit.

The premier said he would maintain pension levels in the Spanish budget for 2014.

After missing its targets by a wide margin last year when it posted a public deficit of 8.9 percent of gross domestic product, Spain is now committed to reducing the shortfall to 2.8 percent in 2014.