SPAIN:SPAIN'S PRIME minister held a crisis meeting on the economy last night as the country seeks a way to calm the concerns of investors driving its debt costs ever closer to unsustainable levels.
José Luis Rodríguez Zapatero postponed his holiday to convene the meeting of ministers including economy minister Elena Salgado and development minister and government spokesman José Blanco to discuss developments in financial markets, mirroring moves in Italy in response to escalating bond market turmoil focused on the euro zone periphery.
The meeting comes ahead of two Spanish bond auctions today that will be a key test of appetite from investors wary of betting on an economy still struggling to gain momentum after a recession against a backdrop of stubbornly high unemployment.
Mr Zapatero has in recent days sought to adopt a more proactive stance on tackling a crisis that threatens to envelope Spain, calling an early election to “create political and economic certainty”, and signalling extra cabinet action on economic reforms.
Further reforms could be adopted after the next scheduled cabinet meeting on August 19th and might include changes to corporate tax as well as measures to stimulate job creation, media said.
An extra cabinet meeting is planned a week later, according to a report yesterday. However, analysts do not expect any new measures to have a great economic impact before the elections, which are scheduled for November.
Mr Zapatero delayed his holiday on Tuesday after markets dumped debt issued by the single currency bloc’s higher-yield nations, sensing European leaders had not put a lid on the escalating crisis with Greece’s second bailout.
After leaving Madrid later that day, the prime minister returned yesterday. “Hopping back and forward from Madrid looks kind of strange – I guess he’s trying to show he’s ‘hands-on’,” said Javier Diaz-Gimenez, economics professor at the University of Navarra IESE business school.
“The best way for Spain to bolster confidence is to take steps that will prove to its creditors that it’s serious about cutting the deficit,” he added.
The cost of financing Spain’s 10-year bonds eased to about 6.22 per cent by late yesterday morning from as much as 6.45 per cent earlier, remaining within touching distance of euro era highs.
Analysts say if yields head much higher, markets could soon force Madrid to follow in the footsteps of Athens, Lisbon and Dublin in seeking external financial help.
Mr Zapatero spoke on the phone to EU president Herman van Rompuy and both agreed the implementation of Greece’s rescue should be accelerated to boost confidence in the markets. – (Reuters/ Bloomberg)
