Spanish banks feel squeeze, says a government official

City A.M. Reporter
A SPANISH government official said yesterday foreign banks were refusing to lend to some of its banks in the latest twist to the Eurozone debt crisis, but denied it was on the brink of seeking a Greek-style European financial rescue.

Treasury Secretary Carlos Ocana acknowledged officially for the first time a liquidity freeze on some Spanish banks in the interbank market and said the government was working to restore confidence through budget cuts and structural economic reforms.

“It’s definitely a problem,” Ocana told a conference of business leaders in the northern town of Santander when asked about the reported credit squeeze.

But he said Madrid was not negotiating any financial aid package.

“Spain does not need additional financing from any international institution. The rumour is false and I deny it,” he said.

The fourth largest economy in the euro area, Spain needs to refinance €16.2bn (£13.4bn) of bonds in July. It has been able to borrow on the markets but at a rising premium, paying an average 3.317 per cent to sell three-year bonds last Thursday.