The European Central bank is ready to buy Spanish bonds but the southern European country will need to restructure its banks and reorganise the financing of its regions, ECB executive board member Joerg Asmussen told a Dutch paper on Saturday. "The ball is in Spain's court," Asmussen told the NRC Handelsblad's weekend edition.
EU paymaster Germany said on Friday that Spain does not need a European bailout, dousing financial market expectations that Madrid will gain early relief from European Central Bank bond-buying. The German Finance Minister Wolfgang Schaeuble's comment seemed to be aimed at deterring Spanish Prime Minister Mariano Rajoy from applying for assistance in a hurry.
Asmussen praised Spain's efforts but said more was needed. "Spain has indeed done much. In particular, the reforms of the labour market have been extensive. But the country must do still more," he said. "(It needs to) restructure the banks. We are still waiting for an assessment of what needs to be done. The external assessment of the asset quality has still not been finalised. Moreover, the financing of the regions needs to be re-organised."
Asmussen said the new programme for purchasing bonds was better than the earlier one as "countries now have to meet strict conditions" before the ECB takes any action. Financial markets rallied after the ECB this month said it was ready to buy bonds of struggling euro zone countries if their governments request help. Spain has come under heavy pressure from the markets to request aid and trigger the bond-buying programme. He said the Greek eurozone exit would be "costly both for Greece and also for exporting countries in the euro area." "It would have effects that extend over and beyond Greece," Asmussen said.
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