The Spanish government would like to see the European Central Bank commit to massive, open-ended sovereign-debt purchases before it asks for help financing itself, Finance Minister Luis de Guindos said, as expectations mount that the country will ask for a new bailout.
The ECB earlier this month signaled that it would consider intervening if Spain asks the European Financial Stability Facility, the eurozone's temporary bailout fund, for aid and enrols in a formal programme. The Spanish government has said it will decide whether to make such a request after the ECB provides more details on the type of support it would offer. This information could come after the central bank's September 6 policy meeting.
The ECB "cannot place limits or say how much it will buy nor for how for how long it will intervene" in secondary sovereign-debt markets, in order to ensure the action is effective, Mr de Guindos was quoted as saying. Previous ECB bond purchases were widely seen as too timid to be effective in calming market turmoil.
The Spanish government is preparing a series of banking sector reforms required under the terms of the aid package. At its August 24 cabinet meeting, it will present a revamp of Spain's Fund for Orderly Bank Restructuring, known as the FROB, to give it more powers to seize ailing institutions. It will also unveil the framework of a so-called bad bank to purchase toxic real estate assets from local banks and hold them until buyers can be found.
Assuming Spain does decide to ask for a second bailout, this one to help the government finance itself, Mr de Guindos said the conditions will likely be discussed at meetings of European finance ministers in the second week of September.
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