Cristobal Montoro, the Budget Minister of Spain, has stated that the country has been effectively shut out of the bond markets. Montoro said that investors are becoming nervous about the high cost of Spain’s sovereign debt and are going to need to seek rescue loans from the IMF, the EFSF and other European Union institutions.
Many experts have said that Montoro’s comments have come at the worst possible time. Some have insinuated that his timing was pretty reckless considering the country was about to launch a new bond auction Tuesday. Without a successful auction, Spain may not be able to raise enough capital to meet its current debt obligations.
Montoro has openly stated that creditors do not have confidence in Spanish debt. He said that the government must work to regain that confidence and have new debt issued. However, his statements may be leading to greater concerns and investors may be reluctant to purchase new debt.
Montoro seems to hopeful that the government will be able to regain the confidence of its citizens if it is able to receive a bailout from major EU institutions. However, Germany has shown some reluctance in continuing with these bailouts. They may be hesitant to pursue a bailout with the current state of Spain’s sovereign debt crisis. Also, warnings of a possible bank run following significant withdrawals in Bankia two weeks ago have raised additional concerns among investors, the EFSF and the IMF.
In order to put Spain back on the right path, the Budget Minister said that Spain will need to be recapitalized. He said that the country cannot be bailed out in the technical sense, but can regain stability if European institutions allow it to take proper measures. He has said that the government does not need a substantial amount of money, but must convince the rest of Europe to provide the resources it needs to get back on track.
