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TheStreet Open House

Spain's Rajoy Comes Closer to Considering Bailout

By Ciaran Giles and Harold Heckle

MADRID -- Spanish Prime Minister Mariano Rajoy has said he would consider asking for financial aid for his country only once the European Central bank has fleshed out its crisis-fighting plans for buying government bonds. This is the closest the leader has come to admitting he is considering a bailout after months of denials.

Meanwhile, to boost confidence in his country's public finances, Rajoy's government said Friday it had increased its savings plans over the next three years by 57%, for a total of 102.1 billion euros ($125 billion) through 2014.

"I haven't made a decision (on a bailout) yet," Rajoy said after a cabinet meeting. "I want to know what the unconventional measures proposed by the ECB are. We do not know what is being proposed."

A day earlier, the ECB warned it would only help lower a country's borrowing costs if that country's government applied for rescue aid from the bailout funds set up by the 17 euro countries. Such a request, however, would come with conditions, such as extra savings cuts.

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Spain borrowing costs are high due to concern over the country's ability to cover huge losses in its banking sector and big debts among regional governments.

With the ECB's role in helping Spain still uncertain, the government said Friday it had submitted to the European Commission a document outlining its spending cuts and revenue increases through 2014.

A statement on the prime minister's official Web site said the plan will save 13.1 billion euros ($16 billion) this year, 39 billion euros ($47.8 billion) in 2013 and 50.1 billion euros ($61.4 billion) in 2014. The total is 57% greater than the amount previously forecast, and all of Spain's regional governments will be required to contribute to the savings, the government said.

The statement forecast Spain's economy would grow at a rate of 1.2% in 2014, by which time it is expected to begin creating jobs.

Concern over Spain's finances remains intense, and that was apparent in financial markets. The interest rate, or yield, on Spain's benchmark 10-year bond ended the day at 6.82%, down sharply from Thursday but still dangerously high.

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