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Spanish leader praises bank rescue — then heads for 'Debt Derby'

June 10, 2012 |  9:06 am

Spain prime minister
MADRID — A day after the bailout request he vowed would never come, Spanish Prime Minister Mariano Rajoy hailed an up to $125-billion loan package from Europe as a "victory for the euro" and sought to cast the deal to rescue Spain’s banks as part of his own efforts to save the country from greater economic calamity.

But Rajoy predicted that, with a 25% unemployment rate, Spain's economy was bound to get worse before it gets better. Even with European Union help, it will still shrink by at least 1.7% this year, he said.

"This year is going to be a bad one,’’ Rajoy told reporters Sunday, in his first comments since Spain announced it would become the fourth and largest Eurozone country to request aid to survive the continent's debt crisis.

On Saturday, Rajoy did not appear in public and left the bank bailout announcement to his economy minister. No amount has been fixed yet but European officials said they would make up to $125 billion available.

Striking a triumphant tone on Sunday, Rajoy credited his own austerity program with preventing Spain from needing an even bigger rescue package. Without tens of billions in spending cuts and tax hikes implemented since his conservatives took power in December, the prime minister said that "what was put forward yesterday would have been a full bailout for the kingdom of Spain."

“Because we had been doing our homework for five months, what did happen yesterday, what was agreed, was the opening of a line of credit for our financial system,” Rajoy said. "Getting a 100-billion euro credit line is not such an easy thing to achieve."

Like Economy Minister Luis de Guindos a day earlier, Rajoy avoided using the word "rescue," instead repeatedly using the phrase "what happened yesterday." He described the package as a soft loan with few strings attached, beyond European oversight of reforms to Spain's banking sector.

The money will be earmarked for Spanish banks and delivered through Spain's own bank-rescue fund, or FROB. However, the government remains ultimately responsible for paying back the loans.

After his news conference, Rajoy hopped on a plane to Poland to watch Spain play Italy in the opening round of Europe's soccer championships. The game has been dubbed the "Debt Derby," in reference to both countries' ailing finances.

Rajoy was unapologetic when asked about the image of his traveling to a sporting event while European taxpayers bail out his country's banks. "I'm leaving for the Euro Cup because the [economic] situation has been resolved," he said. "And the Spanish [national soccer] team deserves it."


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Photo: Spanish Prime Minister Mariano Rajoy addresses the media at the Moncloa palace on Sunday, a day after requesting financial support from the European Union. Credit: Denis Doyle / Getty Images