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Spain's Prime Minister May Seek Help from ECB

The Prime Minister of Spain indicated Wednesday morning he may seek help from the European Central Bank in order to keep the country’s borrowing costs lower.

Spain
Christopher Groenhout | Lonely Plant Images | Getty Images
Spain

According to a Finnish newspaper, Mariano Rajoy said, “In addition to growth, the only option I am considering is using the Central Bank’s announced mechanism."

He told a second Finnish paper, “It is completely ruled out that we would ask for a bailout for the whole country.”

Rajoy spoke to the reporters as part of a visit by the leader of Finland to Madrid. (Read More: Spain's PM Expects 'Reasonable' Terms for Any New Aid.)

Last week,ECBPresident Mario Draghi announced two options for countries seeking help with their borrowing costs. Draghi said the ECB would buy the bonds of countries either 1) through a full bailout from other European partners, or 2) through what he called an ECCL — “Enhanced Contingent Credit Line.” (Read More: ECB to Buy Sovereign Bonds in New Program to Save Euro.)

In either case, the European Stability Mechanism — the ESM — would buy some of the country’s bonds in the primary market, during auctions, and the ECB would buy the country’s bonds on the secondary market in “unlimited” amounts.

The two countries most likely to need the help are Spain and Italy.

But just last week Mario Monti, the Prime Minister of Italy, told CNBC that he would not seek the help of the ECB. (Read More: Italy Has No Plans to Access ECB Bond-Buying Plan: Monti.)

Rajoy has made clear Spain is a different story. The country is suffering a double dip recession and the bursting of one of the worst property bubbles in history. As a result, the banking sector is in crisis. Unemployment is near 25 percent and youth unemployment is more than 50 percent, though many experts believe many young people are employed, but getting paid in cash or “under the table.”

Wall Street analysts say it is now only a question of timing for when Spain seeks help. Some believe it could happen as soon as this Friday when European Finance Minister gather for an informal meeting.

—By CNBC's Michelle Caruso-Cabrera
@MCaruso_Cabrera

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