Spain says markets closing on it, seeks help for banks
By Julien Toyer and Tetsushi Kajimoto
MADRID/TOKYO (Reuters) - Spain said on Tuesday it was losing access to credit markets and Europe should help revive its banks, as finance chiefs of the Group of Seven major economies conferred on the currency bloc's worsening debt crisis but took no joint action.
Treasury Minister Cristobal Montoro sent out a dramatic distress signal about the impact of his country's banking crisis on government borrowing, saying that at current rates, financial markets were effectively off limits to Spain.
"The risk premium says Spain doesn't have the market door open," Montoro said on Onda Cero radio. "The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.
Spain is beset by bank debts triggered by the bursting of a real estate bubble, aggravated by overspending by its autonomous regions. The premium investors demand to hold its 10-year debt over the German equivalent hit a euro era high last week on concerns it will eventually have to take a Greek-style bailout.
Montoro said Spanish banks should be recapitalized 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 hinges on an independent audit of the capital needs of Spanish banks, which is due to report soon.
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 or wanted such a line. Continued...