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The Globe and Mail

Spain denies negotiations on sovereign rescue

Spain's Deputy Prime Minister de Santamaria .


Spain's government denied Friday it had entered negotiations for a sovereign rescue, which would make it the largest victim so far of the euro zone crisis.

Deputy Prime Minister Soraya Saenz de Santamaria repeated to journalists a denial issued earlier in the day in Brussels by a spokesman for European Commissioner for the euro Olli Rehn.

The spokesman, Simon O'Connor, told a news conference there was only one program being implemented for Spain, referring to a €100-billion ($124-billion U.S.) banking rescue loan from the euro zone.

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"There are no negotiations under way for any other sort of program for Spain," he said.

After reading out that statement in a Madrid news conference, the Spanish deputy premier added: "I confirm it."

Mr. O'Connor said in Brussels there was only one program being implemented for Spain, referring to a €100-billion banking rescue loan from the euro zone.

But he conceded that political and technical talks over the crisis were going on all the time with Spain, which has the euro zone's fourth largest economy.

Spain's economy is more than twice the size of Ireland, Greece and Portugal's combined.

They are the three euro zone countries to have received bailouts to date.

But investors increasingly believe that Spain will be forced to request a full bailout for its economy as Madrid struggles to borrow money on the international markets at affordable rates.

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The nation faces a crunch in October with major debt payments due: short-term debt repayments of €9.02-billion and long-term repayments of €24.158-billion.

Speculation is mounting that Spain may ask the euro zone's European Financial Stability Facility or incoming European Stability Mechanism to buy its newly issued bonds so as to bring down its spiralling borrowing costs.

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