Spain's economy ministry said on Friday it had not made a request for economic aid from the European Union, after a newspaper report that the EU was preparing to activate a package in case Madrid asked for it.
This is a lie. There's no rescue. There's nothing asked for, nor will there be, nothing, but nothing. I don't know where they got this from, an economy ministry spokesperson told Reuters. Without citing sources, the FT Deutschland said the EU was preparing for an aid application in the months ahead for access to the fund set up to lend to euro zone countries that run into Greek-style payments problems.
Specifically, Spain might need the aid if the problems at the Spanish banking sector get worse, the report said.
However, it also cited an unnamed European Commission spokesman as saying there were no signs of a Spanish aid request at the moment.
A Commission spokesman, speaking on the record, echoed Madrid's denial, saying Spain had made no request for financial aid and that Brussels was not preparing for one.
We are not preparing anything -- it is speculation, Amadeu Altafaj told a regular news briefing. The Spanish economy ministry has strongly denied this. There is no such request or a plan to table such a request.
Spain has suffered from fears that a debt crisis contagion will sweep the euro zone, particularly affecting the bloc's weaker southern members, after Greece needed to be bailed out by the EU because of its debt problems.
But Spain saw solid demand for a new 3-year benchmark bond on Thursday, a positive sign for the Treasury ahead of a 16.2-billion-euro ($19.50 billion) redemption in July.
Markets did not react to the FT report on Friday.
The 10-year Spanish/German government bond yield narrowed to 189 basis points from 191 late on Thursday, with analysts saying a string of successful bond auctions this week, from Belgium and Portugal as well as Spain, had calmed some market jitters about peripheral euro zone debt.
Spain's unpopular minority Socialist government is having a difficult time pushing through austerity measures and reforms aimed at restoring the economy back to health and is in the midst of a massive restructuring of its banking sector.
An austerity package aimed at slashing a deficit of 11.2 percent of gross domestic product to 3 percent of GDP by 2013 passed parliament by just one vote in May.
(Additional reporting by Jan Strupczewski, writing by Sonya Hepinstall, editing by Mike Peacock)