Spain's state borrowing to fall in 2013

Spain announced Tuesday it plans to reduce its borrowing from the markets in 2013, hailing a relaxation in rates after a punishing year that tipped the nation close to a sovereign bailout. Spain's Treasury estimated its gross financing needs at 215-230 billion euros ($280-300 billion) in 2013, after borrowing a total 249.6 billion euros in 2012. Net borrowing, which excludes re-financing of existing loans, would amount to 71 billion euros in 2013. "With these goals the Spanish Treasury confronts 2013 in a more comfortable situation than last year, also taking into account the improvement in market conditions at the start of the New Year," it said in a statement. "Even in a period of great instability, as happened especially in the second half of 2012, the Treasury managed successfully to complete its financing programme," it said. The eurozone's fourth-biggest economy skirted a rescue in 2012 even after slipping into a recession in mid-2011 that sent the unemployment to 25 percent, the highest in modern Spanish history. As investors fled Spanish debt securities on concern over its soaring public debt, the 10-year government bond yield shot above seven percent mid-year. The benchmark bond was trading at about 5.1 percent Tuesday morning. Spain said it ended 2012 with a total of 688.2 billion euros in state debt securities in circulation, compared to 592.1 billion euros at the end of 2011. Debt levels surged, it said, as the country financed a bailout fund for its debt-laden regional governments, a state-backed fund for the restructuring of troubled banks, and the social security reserve fund. A eurozone loan to rescue the banking sector pushed Spain even deeper into the red. The figures showed Spain borrowed far more in 2012 than the 186.1 billion euros it had forecast in the budget. Already, the estimate for 2013 is well above the budget forecast for gross state financing needs of 207.2 billion euros. Spain's borrowing costs have slumped since European Central Bank chief Mario Draghi last September said the bank was ready to make unlimited purchases of any stricken state's bonds if it first agrees to strict conditions. Prime Minister Mariano Rajoy has praised Draghi's move but is playing coy about the possibility of actually triggering such ECB aid. In his final news conference of 2012, the Spanish leader said he expected a "very tough" year for the economy in 2013 while vowing to press ahead with tight-fisted policies and sweeping economic reforms. Rajoy's right-leaning government has approved a 2013 budget with a further 39 billion euros in austerity measures as it battles to slash the public deficit. "Today we are not thinking of asking the European Central Bank to intervene to buy bonds on the secondary market but that is a very useful instrument that is available to all countries of the Union," the premier said. "If Spain and its government believe that it is necessary to use it, let there not be the least doubt that we will do so. But in principle today we are not thinking of doing it." Spain forecasts a 0.5-percent contraction in 2013, but this is widely viewed as being optimistic. The European Commission and OECD, for example, say they expect Spanish economic output to tumble 1.4 percent this year. Spain has promised to slash its annual public deficit to 3.0 percent of gross domestic product by 2014 from a blowout shortfall equal to 9.4 percent of output in 2011.