NEW YORK | IMF managing director Christine Lagarde has denied it. So have U.S. Treasury Secretary Timothy Geithner and Spanish government: there is no plan or request for a Spanish bailout. However, stocks pared losses Thursday after the Dow Jones agency published a report that the IMF had started contingency plans on a possible rescue loan for Spain. The reporter quoted “people involved in the handling of the Spanish crisis”.
“There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support,” Ms. Lagarde said in a statement.
Just another rumor? Could be, but it happened just a day after the Financial Times published another one: that the European Central Bank rejected Spanish plans to bail out Bankia. That never happened, but the headline went “viral” and dragged the markets and Spanish credibility.
Some headlines are more premonitory than fair. A handful of commentators that take a “Grexit” for
granted also speak of the Spanish bailout as a “not if, but when” solution.
Spanish deputy president Soraya Saenz de Santamaría traveled to Washington to discuss the Spanish government's efforts to strengthen its financial sector amid speculation. She met with Ms. Lagarde, then with Mr. Geithner. On the table, there was a very tough situation, plans to support recovery and job creation but no rescue whatsoever. According to a Treasury spokeswoman, they talked about “significant progress Spain has made on fiscal and structural reforms.”
It's been a turbulent month of May for Europe, especially for Spain, with its shaky banks and soaring government borrowing costs. Although Spanish Economy Minister Luis de Guindos has explained that Bankia is a “specific” case, some investors aren’t waiting for the external auditors stress test on Spanish banks in June, and instead are using Bankia as a benchmark for the rest of the industry. The European Union has urged the country to explain how it plans to finance the overhaul of its banking sector. Meanwhile, the yield on Spain’s 10-year government bond climbed 21 basis points to 6.63 percent on Wednesday, close to the euro-era record of 6.78 percent hit on Nov. 17. By contrast, the yield on Germany’s two-year bond fell to zero.
