MADRID (AP) — Spain's finance minister on Tuesday denied suggestions that the economically troubled nation was close to needing a bailout last month, while the premier insisted the country will overcome rising investor concern about its ability to pay its mounting bills without outside help.
The denial from Elena Salgado came a day after Spanish union leader Ignacio Fernandez Toxo reported that Prime Minister Jose Luis Rodriguez Zapatero had said he had seen "the edge of the abyss, in the form of a bailout for the Spanish economy" during an August 17 meeting with labor and business leaders
Salgado said in a radio interview that Spain was not close to needing a bailout, then or now.
"The first few days of August were a week of great nervousness, but I do not think we were on the verge of a bailout," Salgado said.
Zapatero, speaking in Turkey, said that Spain will continue to finance its obligations on its own, even though it is paying high rates to investors buying the country's bonds.
Spain is strong "and will know how to withstand the tensions," he told reporters after meeting with Turkish Prime Minister Recep Tayyip Erdogan.
Yields on Spanish bonds — a direct measure of investor jitters over a country's debt — skyrocketed to euro-era highs in early August, prompting the European Central Bank to intervene in the markets to get the country's borrowing costs down.
Yields shot up again Monday amid widespread worries over the possibility of another recession in Europe and around the world, and eased somewhat Tuesday, although not much. The yield on 10-year Spanish bonds stood at 5.20 percent, up from just over 5 percent last week.
The higher rates make it much more expensive for Spain's government to finance its operations, and Salgado conceded that growth in Europe is slowing but sought to downplay fears that Spain was heading back into recession.
"Between weak growth and a recession there is a big distance, which I do not think will be covered," she said.
The Spanish government's target for GDP growth this year is 1.3 percent and 2.3 percent for next year, but these figures are widely seen now as overly optimistic. The economy grew just 0.2 percent in the second quarter, down from a revised 0.4 percent in the first three months of the year.
Government spokesman Jose Blanco singled out Greece and Italy Tuesday as being among the causes of recent global — and Spanish — market turbulence, saying those countries were failing to meet austerity targets.
"That affects the decisions of the markets that have to buy our debt," Blanco said.
The officials spoke just hours before thousands of union members and activists held rallies in Madrid and in other large Spanish cities to vent their anger against a constitutional amendment that will force the government to keep its future deficits very low.
They fear it heralds drastic spending cuts on social policy, and marks the end of the welfare state in Spain. Many said Spain's citizens should be allowed to vote on the constitutional amendment in a referendum, instead of allowing politicians to fasttrack it to appease investors.
"I want to vote or decide on the change," said 51-year-old protester Nieve Noguerales, waving a banner criticizing the government for breaking a "social pact" with workers.
The amendment was approved by the lower house of Parliament last week amid furious opposition from leftist and regional-based parties and goes before the Senate on Wednesday, where passage is expected.
That is because the measure is backed by Spain's two main parties — Zapatero's ruling Socialists and the opposition conservative Popular Party.
With Spanish unemployment at nearly 21 percent and widespread anger over its sluggish economic growth prospects, the Popular Party is favored to win general elections scheduled for Nov. 20. Zapatero is not seeking a third term.
Alan Clendenning and Jorge Sainz contributed from Madrid.
- Jose Luis Rodriguez Zapatero