Spain pledges reform timetable, paves way for bailout

Fri Sep 14, 2012 7:13pm EDT
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By Julien Toyer and Francesca Landini

NICOSIA (Reuters) - Spain told euro zone finance ministers on Friday it will set clear deadlines for structural reforms by the end of the month, in a move European diplomats said would pave the way for an aid request before long to help it tackle its debt pile.

Madrid's borrowing costs have fallen sharply since the European Central Bank said it was ready to buy Spanish bonds but big borrowing needs before the year-end and a deepening recession mean most analysts and policymakers believe it is only a matter of time before it will require help.

"We will adopt a new set of reforms to boost growth ... It will be in line with the recommendations of the European Commission," Economy Minister Luis de Guindos told reporters after meeting his peers in Cyprus.

Euro zone policymakers have said that to get aid, Spain would need to adhere to strict conditions, which usually entail detailed reforms and concrete deadlines, rather than vague plans.

Madrid's move is therefore seen by EU diplomats as a precursor to a request that pre-empts any euro zone calls for further reforms in an attempt to limit a political backlash at home, although de Guindos insisted the package was unrelated to any bailout terms.

"This is a blueprint for a fiscal and structural program, this is a blueprint for a way forward," said one senior EU diplomat on condition of anonymity.

"Yes, we're moving towards a bailout but now a decision has to be taken by (Spanish Prime Minister Mariano) Rajoy. And right now, it's hard to know his intentions," the diplomat added.

The new reform program will be made public along with the 2013 budget on September 28, the day Madrid will also publish the results of a final stress test of the country's banking sector.   Continued...

Spanish Economy Minister Luis de Guindos looks on during a meeting of Ibero-American finance ministers and delegations in Madrid September 11, 2012. REUTERS/Andrea Comas