De Guindos asks the ECB to buy Spanish debt in a “strong and unlimited” way

De Guindos asks the ECB to buy Spanish debt in a “strong and unlimited” way

  • The Minister of Economy and Competitiveness considers that setting limits would make effective an aid that aims to dispel doubts about the euro zone.
  • The counterparts that will have the aid to Spain will be defined in the meetings of the Eurogroup and Ecofin in the second week of September.
  • He understands that they are “doing their homework” both in the fiscal area and in the structural reforms, and “this is recognized by Brussels and the IMF”.
Luis de Guindos

The Minister of Economy and Competitiveness, Luis de Guindos. EFE

The Minister of Economy and Competitiveness, Luis de Guindos , has said that the intervention of the European Central Bank ( ECB ) in the markets to alleviate the pressures on the Spanish debt must be forceful and not have beforehand a limit of neither amount nor duration.

The minister has indicated that to this type of interventions “you can not limit them or you can not specify at least the amount with which you are going to intervene or for how long” so as not to diminish the effectiveness of an aid that aims to dissipate doubts about the euro area.

Counterparts for the aid

Regarding the counterparts that European aid to Spain will have, De Guindos explained that they will foreseeably be defined at the meetings of the Eurogroup and Ecofin (finance ministers of the euro and EU countries) that will take place in the second week of September . By then the ECB’s governing council will have already explained how it intends to execute the debt purchase program in the secondary market, which the Spanish government will analyze before making a final decision in this regard.


Buy short-term bonds without exercising their role as preferred creditor

What De Guindos assumes is that the ECB will act in the secondary market (where investors exchange the debt already issued) buying short-term bonds and without exercising its role of preferred creditor, which would scare away the rest of investors and raise the risk premium.

The ECB interventions “should not specify neither amount nor time horizon and, as the ECB has indicated, should take into account the problems generated by the character of preferred creditor”.

Positive scenario for Spain

In his opinion, the attitude of the ECB has opened “a very positive scenario” for the Spanish Government, since the entity has recognized that the pressure of the markets on the Spanish debt responds largely to something that goes ” beyond the domestic policy “and has considered it appropriate to intervene to correct it.

The different types show doubts about the future of the euro “It did not make sense that some countries paid negative interest rates and that others paid much higher rates , which shows a malfunction of the institutions of the euro area” , he has affirmed.

“The different types raise doubts about the future of the euro and difficulties for the transmission of monetary policy impulses”, added De Guindos.

The minister has not been worried about the possible conditions that the European institutions can put to what the experts have baptized as ” soft rescue “, since he understands that Spain is “doing its homework” both in the fiscal area and in the structural reforms and this is being recognized by the International Monetary Fund (IMF) and Brussels.

“In some way they are already very defined (the conditions). I believe that Spain has presented its budgetary adjustment program and its structural reforms, which from a generic point of view are accepted as sufficient and adequate,” the minister explained. budget advance for 2013 and 2014 that foresees a fiscal adjustment of almost 90,000 million in those two years.

Commitment to reduce the deficit

He insisted that Spain’s commitment to reducing the deficit to 3% of GDP in 2014 is unequivocal, which is why they have been adopting or planning to implement the recommendations proposed by Brussels, such as the increase in VAT or the increase in the effective age of retirement.

The ability to generate growth that sustains the public debt and finances is worrisome The Government’s intention, he recalled, is to negotiate with the political parties and social agents measures that will bring the effective retirement age closer to 65, after the previous one Executive will raise the legal age to 67, which will be fully in force since 2027.

In his opinion, what worries the markets of the situation in Spain is not so much the short-term budgetary policy as the capacity of the economy to generate the future growth necessary to sustain the State’s finances and the public debt.

In this sense, he has been convinced that Spain is a “clearly solvent” country because the economy is competitive, as reflected by the fact that exports are growing at a rate of 3.4% until June and there is a trade surplus with economies as strong as France and Italy.