Daniel Flynn and Annika Breidthardt
NICOSIA // Euro-zone finance ministers yesterday pressed Spain to clarify whether it would seek financial support after the announcement of the European Central Bank's (ECB) new bond-buying programme sharply reduced Madrid's borrowing costs.
Spain's finance minister, Luis de Guindos, deflected questions about a possible aid application on arriving for talks in Cyprus, saying they would discuss in general terms the conditions for ECB intervention in the markets.
"I'd like them to set out their position because it hasn't been clear over the summer what it is," said Michael Noonan, Ireland's finance minister, reflecting concern among several euro-zone countries that uncertainty over Spain is holding back a recovery from their debt crisis.
The ECB has made clear that a Spanish request for help from the euro-zone's bailout fund, and the negotiation of strict policy conditions and monitoring, is essential to trigger its bond- buying intervention in the secondary market.
Madrid is resisting any austerity conditions that go beyond the European Commission recommendations it is already implementing, while north European creditors, led by Germany, are adamant that any aid would come with tough conditions.
"It is much more important to meet our public deficit targets and comply with our programme of reform than a potential rescue," Mr De Guindos said when asked about such conditions.
"The fundamental question here is to establish the elements of what could be an intervention of the ECB on the secondary market. I believe that's what we will do today, although it will be in a generic way and not directly in relation to Spain."
For the first time since the start of the year, the talks will take place at a time when market pressure for immediate action to solve the sovereign-debt crisis is easing, rather than mounting.
The ECB's announcement that it could buy unlimited amounts of Spanish bonds, should it apply for help from the euro-zone bailout fund, brought Spanish 10-year bond yields down from 7.64 per cent on July 24 to 5.62 per cent on Thursday.
Italian yields have fallen to about 5 per cent.
That increases the temptation for Spain, and EU paymaster Germany, to try to tough it out without an assistance programme that would be politically unpopular in both Madrid and Berlin. Each time market stress has eased in the nearly three-year-old crisis, German leaders have said they see no urgent need to act.
Spain is reluctant to ask for help because the prime minister, Mariano Rajoy, fears a political backlash at home. However, he may eventually have no other choice given Madrid's borrowing needs.