(EurActiv) — Spain has admitted it is losing access to credit markets and appealed to its European partners to help revive its banks, a distress signal that will intensify global pressure on Europe to move faster to the aid of its fourth-largest economy.
Madrid’s dramatic statement – that its borrowing costs had become prohibitive due to its banking crisis – came as the Group of Seven major economies, afraid of a possible run on Spanish banks, held urgent but inconclusive talks on the eurozone.
“The risk premium says Spain doesn’t have the market door open,” Spanish Treasury Minister Cristobal Montoro said. “The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.”
The European Central Bank holds its monthly policy review later today (6 June) and could indicate a readiness to cut rates soon, although it is not expected to come up with any immediate initiatives to resolve the crisis.
Spain is the latest member of the euro area under pressure to accept international aid following financial rescues of Greece, Ireland and Portugal in the two-year debt crisis.
The country is beset by bank debts triggered by the bursting of a real estate bubble, and aggravated by overspending by its autonomous regions.
A senior European G7 source, who requested anonymity due to the confidential nature of the G7 call, confirmed that Germany was pushing Spain to accept international aid to help it recapitalise its stricken banks.
“They don’t want to. They are too proud. It’s fatal hubris,” the source said of the Spanish government.
Berlin and the European Central Bank have so far resisted pressure from Madrid to ride to its rescue without forcing Spain into the humiliation of an internationally supervised bailout.
Montoro said Spanish banks should be recapitalised through European mechanisms, departing from the previous government line that Spain could raise the money on its own.
The European Union’s top economic official, Olli Rehn, said Madrid had not requested EU assistance but other sources said a lot hinged on an independent audit of the capital needs of Spanish banks. They said the first-phase audit would be completed this month – potentially still weeks away.
Sources in Berlin and Brussels denied a report in German newspaper Die Welt that European officials were considering offering Spain a precautionary credit line via the bloc’s rescue fund by mid-June.
Two Spanish government sources had said earlier that Madrid neither needed nor wanted such a line.