Spanish leader : will seek rescue, if needed

Spanish Prime Minister Mariano Rajoy promised Wednesday to seek a bailout if the stricken economy needs it, but some media said he planned no such request this year. Spain's leader has kept world markets in suspense as he ponders whether formally to apply for a eurozone bailout, submitting to external supervision and strict conditions. Such a move would unlock assistance from the European Central Bank, which has outlined plans to make unlimited purchases of bailed-out states' bonds to bring down their debt refinancing costs. "The instrument is very important and if Spain needs it, be absolutely and totally sure that I will request it," the 57-year-old leader of the right-leaning government told parliament. Spain, which has already secured a eurozone rescue loan of up to 100 billion euros ($129 billion) for its banks, seemed a few months ago to be on the verge of crying out for a broader sovereign rescue. Its borrowing costs soared in mid-summer to unsustainable levels, with the benchmark 10-year government bond yield piercing a danger level of seven percent. But Rajoy has been given a breathing space. The mere fact that ECB President Mario Draghi revealed its bond-buying plan in September has stopped investors betting against Spanish bonds; they know the central bank could intervene at a moment's notice if Madrid acts. "That Mr. Draghi made that announcment and that he said that it is an instrument that could allow him to buy debt in the secondary market is very important," Rajoy said. Spanish media Wednesday cited sources in the prime minister's office as saying that the Popular Party government could now wait until next year before seeking any bailout. "The government does not have plans to ask for the bailout this year unless there is a cataclysm or a colossal accident," one unidentified source was quoted as saying on Cadena Ser radio. Asked to comment, an official in the prime minister's office said: "There is nothing new, the government's position has not changed." Spain's economy is deep in recession and struggling with a 25-percent unemployment rate as the government pursues an austerity programme to bring down a bloated public deficit. Gross domestic product dropped by a quarterly rate of 0.3 percent in the third quarter, marginally better than the previous quarter's 0.4-percent decline, official data showed Tuesday. But when compared with output a year ago, the economy slumped 1.6 percent in the third quarter -- the sharpest annual decline since the end of 2009 during the previous recession provoked by a 2008 property crash. Rajoy's administration is battling to slash its heavy public deficit alone, launching a programme to squeeze out 150 billion euros in savings between 2012 and 2014, including 39 billion euros in 2013. That same austerity programme, however, acts like a brake on domestic economic activity. Retail sales fell by nearly 11 percent in September, the sharpest monthly fall since records began in 2003, official records show.