(MENAFN- Arab Times) Spanish Prime Minister Mariano Rajoy inched closer on Friday to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached and what form the rescue would take.
His comments, at his first post-cabinet meeting news conference since taking office last December, came a day after the European Central Bank signalled it was preparing to buy Spanish and Italian bonds but only after EU bailout funds were triggered and countries had asked for help.
A source said separately that Spain would not decide whether to apply for several weeks.
Buying bonds and providing aid would all be designed to bring down what have been prohibitive borrowing costs in the indebted countries.
Rajoy said he was ready to do what is best for Spain, going far further than he did on Thursday when, during a press appearance with Italian Prime Minister Mario Monti, Rajoy three times declined to say whether he would seek the aid.
"I will do, as I always do, what I believe to be in the best interest of the Spanish people," Rajoy said on Friday.
"We still don't know what these measures are," he said, reference to a comment by ECB President Mario Draghi that the bank was examining non-conventional measures to defend the euro.
"What I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision," he said.
A source familiar with Rajoy's thinking confirmed this possibility was actively looked at and that Rajoy was ready to bear the political cost of a request.
Spain has already asked for aid for its stricken banks.
"People have said the main reason why he is not seeking help is because he is too proud. But this is not true. He requested an assistance for the banks because it was the adequate instrument to solve a specific problem. There is no opposition to do it again," the source said.
An aid request would entail negotiating a memorandum of understanding with other euro zone countries and would likely bear strong conditionality, something Rajoy wants to discuss in detail before moving forward.
Stringent
Although Spain already complies with stringent EU and International Monetary Fund demands to reform its economy and has announced a package of 65 billion euros ($79 billion) of tax hikes and spending cuts in July, the government fears it could now be asked to reform further the pension system.
The measure is the last campaign pledge Rajoy has not been forced to break so far and could undermine even more the support for the government after it already fell sharply in recent weeks as hundreds of thousand of Spaniards took the streets to protests against austerity steps.
A euro zone official told Reuters last week Spain had for the first time conceded at a meeting between Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble it might need a full bailout worth 300 billion euros if its borrowing costs remain unsustainably high.
Rajoy's office however denied that talks on this issue had taken place.
People who discussed the question with Rajoy explain that he may still hope to avoid making the request because he thinks by just knowing that the EU rescue funds and the ECB are geared up would be enough to shield Spain from market pressures.
"The thinking is that the instruments need to be in place and possibly the risk premium will go down so much that there will be no need to go any further," said one senior politician.
Spain has no plans to slash pensions next year as part of its efforts to bring its public deficit under control, Prime Minister Mariano Rajoy said Friday.
"With the data that I currently have, I have no intention to lower pensions next year," Rajoy said in a rare solo press conference called to mark his first months in office.
With one in four people out of work in Spain, growing numbers of people have come to rely on the pension payments of parents or grandparents to survive.
Last month, Rajoy's conservative government introduced a fourth austerity package since it took office in December, aiming to slash the public deficit by 65 billion euros ($80 billion) over the next two and a half years. The government announced the austerity measures after European Union finance ministers agreed to relax Spain's deficit target for this year to 6.3 percent of Gross Domestic Product from from the previous 5.3 percent.
The austerity measures include a rise in the sales tax to 21 percent from 18 percent, cuts to unemployment benefits and eliminating civil servants' annual Christmas bonus.
"These are not nice measures, these are not popular measures. We do not promise miracles. It is a huge task but not an impossible task," Rajoy said.
Support for Rajoy's conservative Popular Party fell sharply in July after it announced its latest austerity measures.
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