Reuters: Market News: UPDATE 1-Spain fires back at Italy, says EU should be supportive

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UPDATE 1-Spain fires back at Italy, says EU should be supportive Apr 11th 2012, 15:59 Wed Apr 11, 2012 11:59am EDT * Rajoy-EU leaders should adopt more cautious talk on Spain * Govt sources-Europe should show more backing for reforms * European Commission wants details about regions' budgets By Julien Toyer and Paul Day MADRID, April 11 (Reuters) - Spanish Prime Minister Mariano Rajoy rounded on his Italian counterpart Mario Monti on Wednesday by calling on European leaders to be more careful when they talk about Spain as it struggles to show markets it can control its finances. Several Spanish government sources also told Reuters Madrid expected more backing over its ambitious reform agenda from Europe, especially the European Central Bank. Reports in Italian and Spanish newspapers - quoting Monti as saying Spain's financial problems were the main reason for renewed tensions on debt markets in Europe - irritated Spain. . Monti's office, however, denied the comments. "I wish to say the following with regard to some statements which have been made in the EU, and more explicitly last night by some EU leaders," Rajoy told parliamentarians from his governing People's Party, falling short of mentioning Monti by name. "We hope that they assume their responsibilities and are more cautious in their statements. We don't talk about other countries. We wish other EU and euro zone countries the best. What is good for Spain is good for the euro zone." Italian newspaper Corriere della Sera on Wednesday said Monti told aides during a visit to the Middle East that Italy was "paying on the rebound for the Spanish crisis". Monti already caused unease in Madrid three weeks ago after publicly expressing concern about Spain's public finances. Italy's one-year borrowing costs doubled at a sale of short-term bills on Wednesday, mirroring fresh doubts about weaker euro zone countries and highlighting market nerves ahead of a more challenging auction of three-year bonds on Thursday. The Spanish government sources said Spain needed more support from its partners for what it had already done. "Spain has done its part of the job. Now Europe has to do its part of the job as well," a source in Rajoy's office said. The source was referring to the possibility of building stronger EU institutions and firewalls to protect Spain from markets turbulences. Madrid has repeatedly ruled out applying for any kind of financial aid from Europe. Another source close to the Spanish government also said the centre-right government needed more support from its European partners. The source said the ECB should be allowed to act as a lender of last resort for the euro zone's 17 members, banned by EU treaties. DETAILS ON REGIONS ECB Executive Board member Benoit Coeure said on Wednesday that what was happening in Spain, where sovereign debt yields have spiked back to 6 percent amid concerns over the country's ability to cut its deficit, did not reflect the fundamentals. He added that the Frankfurt-based institution, which has injected about 1 trillion euros ($1.31 trillion) into the financial system since December, still had its bond-buying program as an option to intervene in support of Spain. In a sign of increased support from EU partners, Germany and France, the two heavyweights of the euro zone, praised Madrid for its "huge efforts" to reform the economy and regretted they were not recognized by investors. Since December, Madrid has announced several key reforms aiming at cleaning up the balance sheet of its banks, reducing an unemployment rate currently close to 23 percent and improving controls over the spending of its indebted regions. It also announced late March cuts of 27 billion euros to its central government budget and said on Monday it would save an extra 10 billion euros a year by reforming its health and education systems. The European Commission welcomed these new austerity measures and said it had a positive view on the country's 2012 budget draft. However, it said it now needed more information on the autonomous regions' budget plans before providing a full assessment and make recommendations to the Spanish authorities. "We expect this information by the end of this month, as well as the national reform program, not only from Spain but from the 26 other members of the Union," a Commission's spokesman said on Wednesday. The Spanish government source said the details would be sent to the Commission by the end of the week, probably after Rajoy meets key region leaders of his party on Saturday. Link this Share this Digg this Email Reprints

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