Spain sticks to funding plans after bank rescue

Spanish and Italian bond yields fell today, allaying immediate fears of a fiscal crisis in the country

Spain said it would stick to this year's programme of fundraising in financial markets after the rescue of its banks over the weekend relieved pressure on debt and equities.

Spanish and Italian bond yields fell on Monday, allaying immediate fears of a fiscal crisis in the country, while Spanish bank shares leapt 6% and European equities soared.

The Spanish Treasury said it would continue to tap debt markets with regular auctions after the 17-nation currency area agreed to lend Spain up to 100 billion euros to prop up its ailing banks on Saturday.

The government remains committed to its fiscal consolidation programme and structural reforms it said in a statement published on the economy ministry website late on Sunday.

Spain has avoid being put under the kind of scrutiny which Greece, Ireland and Portugal were forced to accept for their bailouts but the implementation of its fiscal plans and the restructuring of the banks will be closely monitored.

As in other aid packages, a troika will oversee Spain's financial assistance, EU Competition Commissioner Joaquin Almunia said in a radio interview on Monday.

The International Monetary Fund will join the Eurogroup and the European Central Bank to oversee the process, Almunia told Cadena Ser radio, echoing similar comments from senior policymakers around Europe.

Spain's Prime Minister Mariano Rajoy said he had pushed hard to obtain the loans which are part of a wider government plan to put the country back on track of growth.

He also said the rescue of the banks coupled with wide-ranging reforms he implemented in the last five months saved the country from a fully-fledged bailout.

However, analysts are sceptical that the plan will be enough to alleviate Spain's funding woes and the euro zone debt crisis.

Spain, which has already achieved 58% of its funding program this year, is due to auction 12 and 18-month T-bills on June 19 and bonds on June 21.

The government still needs to refinance 82.5 billion euros of debt maturing by the end of the year, with a big hump at the end of October, and Spain's regions have a further 15.7 billion euros of debt maturing in the second half of 2012.

The central government and the regions also have to fund a deficit of about 52 billion euros this year.