Business World

Thursday 18 January 2018

Noonan lays blame for market jitters on Spain's delayed bailout plea

Peter Flanagan in Luxembourg

SPAIN has itself to blame for the surging yields on its bonds, Finance Minister Michael Noonan said yesterday, and accused the country of causing market "jitters" by delaying its request for a bailout of its banks.

Speaking at the eurozone finance ministers' meeting last night, Mr Noonan said Spain's inaction in the last fortnight, since announcing it would seek a bailout of its banks, had allowed the market for Spanish debt to spiral out of control, with the interest rate of its government bonds reaching almost unsustainable levels.

"I think if Spain made an application on the weekend the agreement was made and they quantified their needs, I think that might have eased the market concern," he said.

"While there's no request and while there's no certainty of the amount being requested, I think that makes the markets jittery."

Independent auditors said Spanish banks may need up to €62bn (in extra capital), to be filled mostly by a eurozone bailout. Many in the markets see the package as a mere prelude to a full programme for the Spanish state, which Madrid vehemently denies it will need.

Mr Noonan called on Europe to learn from errors made in the bailout of Ireland when dealing with Spain, saying the idea of transferring bank debts on to the state's balance sheet had been proved as the wrong course. "(Spain's borrowing costs) are very severe. . . but I thought that the experience of Ireland should have been learned by the European authorities, and to recapitalise their banks and to transfer the accounting of it directly on the sovereign seems to me an additional burden," he added.

The splitting of bank debt from sovereign debt is a key demand for the Irish Government, but Mr Noonan appeared to be holding out little hope of making significant progress on that subject yesterday or at the Ecofin meetings today.

The minister said he would be pursuing the matter "informally" at Eurogroup, but there is believed to be significant opposition from Germany, Holland and other creditor countries.

He said he would take a similar tack on getting a deal on the promissory notes used to bail out the former Anglo Irish Bank.

The two-day meetings are carrying on without the new Greek finance minister Vassilis Rapanos, who did not attend having been only appointed to his post a day earlier.

If he had attended, the scale of Mr Rapanos's task in his new job would have been laid out to him by the Dutch and Finnish finance ministers, who both opposed Greek pleas for a two-year extension to get its budget deficit down to 3pc of gross domestic product.

Finland's Jutta Urpilainen said it was "very important" that a deal was struck with Greece.

"(Tighter budgetary controls) have been accepted in every euro country and every euro country parliament and I think it's very important that we all respect that," he added.

Irish Independent

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