Spain will refuse to play along German/EU imposition and seek a full-blown bailout other than the current financial aid given to its banks should new conditions come attached.
Spain is resisting and continues to demand that in case of requesting a sizeable rescue package, conditions should not be any different from those already agreed for recapitalising lenders, an EU source said Tuesday, AFP reports.
Prime Minister Mariano Rajoy is under pressure to call in financial assistance as the country deepens into recession. The Spanish government said on Friday it plans to save up to 102 billion euros ($125 billion) by 2014 in order to bring public finances back to 3.0% of GDP.
Since ECB chief Mario Draghi raised the prospect of reactivating the bond buying program last Friday, aiming to bring down Spanish bond yields, the pressure is now on Rajoy's shoulders. Any ECB assistance, if Draghi's words are of any reliable guidance, will be subjec to the Spanish government first requesting aid to Euro zone authorities.
"I want to know what these measures are to see if they are adequate," Rajoy said on Friday. "Then I will take the best decision for the general interest of the Spanish people."
S&P revises Greece’s outlook to negative; CCC/C rating affirmed
Following news that IMF is aiming to ease Greece debt burden as the country continues well off track to meet the Troika targets, S&P rating agency reminds the market the perils of default by Greece, saying the country is likely to require additional financing for 2012 under the EU/IMF program. The rating agency points at the worsening Greek economy, which remains stuck in a depression despite the denial from politicians in the Eurozone, which will not recognize it. S&P estimates that the Greek economy will shrink by 10-11% between 2012-2013. ‘CCC/C’ rating affirmed.
EU rejects possibility of lowering Greek deficit target
On Tuesday the European Commission spokesman Oliver Bailly assured that the deficit target for Greece will not be lowered and that it is expected that the Hellenic Republic will be able to reduce its debt to 120% by the end of 2020.
Bailly added that the deficit reduction plan is a very ambitious objective for the Greeks but that the EC is confident they will succeed in reaching it.
Fitch: European investors believe Eurozone will prevail
Fitch rating agency published the results of a survey conducted among European market participants between 2 July and 2 August which reveals that “investors expect the troubled Eurozone to resist pressures and stay intact.”
According to the findings “only a small minority of 5% said they believe the Eurozone end-game will be a wide-scale break-up. A further 9% think there will be multiple sovereign debt defaults within the zone but do not expect these events to cause a break-up.”
The rating agency adds that “21% of respondents expect Greece and possibly one or two more countries to exit the union. However, the majority expect a move towards fiscal union (33%) or a 'muddling through' (31%).”
Full results of the survey will be published in mid-August.
IMF aiming to ease Greece debt burden
The International Monetary Fund, appears to be increasing the pressure on Euro zone countries in order to ease the burden of the toxic bailout loans made available to Athens, officials familiar with ongoing discussions said. The WSJ broke the news.
Since the Greek bailout program is way off track, now comes the realization that discussions to lighten the Greece debt return obligations are a "must" as the country's deepens further into poverty and depression.
IMF officials continue to stick with tough lines over the importance of Greece's debt being reduced to "sustainable" levels before throwing additional billions of euros to keep Athens afloat and on the 'ilusion' game a bit further.
IFR Markets notes: "Contributor nations, claiming they have little chance of getting repaid, want Europe to bear a larger burden to get Greece's debt/GDP closer to 100% than the previously agreed upon 120%. This will not go over well in the capitols of Europe but barely got a notice this afternoon in holiday-thinned markets."
As reported by the WSJ: "The most effective way to do this would be for Greece's bailout lenders to forgive some of the debts Greece owes to them. But such a step would meet fierce resistance from euro-zone governments, such as Germany, which have already lent 127 billion euros ($157 billion) to Greece and are adamant that it shouldn't expect any more concessions. An IMF spokesman declined to comment."
WSJ adds: "The IMF has raised several options for filling the hole that will also push Greece's debt closer to 100% of GDP, officials said, but these ideas are meeting staunch resistance from Europe. The mildest would be another cut on the interest rate Greece must pay on the bailout loans from euro-zone governments. Greece is set to pay over EUR39 billion in interest payments from 2012 through 2014."
Obama calls Spanish PM to support efforts to improve the economy
U.S. President Barack Obama had a telephone conversation with Spanish PM Rajoy to support the troubled Mediterranean economy. Obama told Rajoy he recognizes "the complex challenges faced by Spanish citizens" and "reiterate its support for the efforts of President Rajoy to return the Spanish economy on track "according to a statement from the White House.
The Spanish government said in a statement that, in addition, both leaders have "tested the market situation." Obama already spoke last week with French President, François Hollande, and Italian Prime Minister, Mario Monti, as stated by the White House spokesman, Jay Carney. Both with them and with Rajoy, the U.S. president agreed on the need to stabilize the situation in the euro zone, according to the White House.
Obama has repeatedly urged the leaders of the European Union to take the necessary measures to control the economic crisis, and thereby prevent spreading to other parts of the world. In May, in a speech at the G8 meeting, Obama said: "If a company goes bankrupt in Paris or Madrid, that means less business in Pittsburgh or Milwaukee."