The eurozone sovereign debt emergency showed no signs of abating yesterday as the Spanish government desperately haggled over the terms of its expected bailout and the European Central Bank refused to ease monetary policy for the currency bloc, despite signs of stricken European economies sinking still deeper into recession.
Madrid’s Economy Minister, Luis de Guindos, insisted once again he was not making any plans to follow Greece, Portugal and Ireland in requesting a bailout from the European Union and the International Monetary Fund. But, behind the scenes, Spanish ministers accept that an external rescue of the country’s beleaguered banking sector is now necessary. Spain is trying to persuade its European partners to allow the European bailout fund to inject capital directly into its banks, rather than diverting the money through the state. Madrid fears that a full-blown national bailout would be accompanied by an onerous EU/IMF inspection system.