Investors piled pressure on Spain to request international aid and trigger a European Central Bank bond-buying programme seen as inevitable to help the country finance its debt.
Spain is at the centre of the eurozone debt crisis, now in its third year, with investors concerned that Madrid is unable to bring down its massive public deficit and control its soaring debt. The government has already requested a European lifeline of up to €100 billion for its banks, but investors are not convinced that the country can meet its financial obligations and return to economic growth without international assistance.
ECB Governing Council member Luc Coene warned Prime Minister Mariano Rajoy against delaying triggering the programme, saying it would not take long for yields to rise if he did. Deputy Prime Minister Soraya Saenz de Santamaria said the government was still considering the terms of a European bailout, which would be a condition of ECB help, a stance that is weighing on investors' patience.
Some analysts believe he may now be waiting until after October 21 regional elections, including in his home state of Galicia and the Basque Country, before taking a decision.
Economy Minister Luis de Guindos said last week the government would present on September 28 a new set of reforms to boost growth in line with European Commission guidelines. The new measures are seen as a face-saving move to comply with European demands before making an official request. "We believe Spain is paving the way to requesting a precautionary programme at the beginning of October, hopefully before the next Eurogroup meeting in Luxembourg. The presentation of a new reform agenda, therefore, looks to us in part as useful for the Spanish government to save some face, in the sense that it is very likely to be aligned on the conditionality requested in exchange for the bailout."
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