UPDATE 3-Spain pledges more bank health checks, debt updates

* Spanish/German spread hits euro lifetime highs

* Zapatero “absolutely” rules out bailout

* Source says Spain will resist pressure for more austerity

(Recasts, adds comments)

By Fiona Ortiz and Martin Roberts

MADRID, Nov 26 (BestGrowthStock) – Spain said it will publish
results of extra health checks on its banks next spring and give
monthly updates on its public debt, offering concessions to
markets focused firmly on fears Europe’s debt crisis may spread.

But despite investor unease continuing to push up its debt
costs, the country would resist pressures to accelerate fiscal
reforms, a source at the prime minister’s office said.

“Those who are taking short positions against Spain are
going to be mistaken,” Prime Minister Jose Luis Rodriguez
Zapatero said in an interview with broadcaster RAC1 radio in
which he “absolutely” ruled out the need for a Greek- or
Irish-style bailout.

Analysts say Spain could reassure investors if it speeded up
pension reforms or announced another round of mergers among its
troubled savings banks, but almost all agree further austerity
measures in an economy struggling to stave off a second
recession would do more harm that good.

The source said Zapatero was convinced that any big new
measures from Spain would only spread panic on the market. “The
markets can’t always win. That’s unsustainable,” he said.

The risk premium demanded by investors to hold Spanish debt
(ES10YT=TWEB: ) compared with German benchmark bonds rose to a
euro-era high of 274 basis points on Friday while the euro
(EUR=: ) fell to a fresh two-month low.

Markets have continued to sell off Spain’s sovereign bonds
on concerns it might eventually be fourth in line after Portugal
for a rescue, with worries about the stability of its weaker
banks pulled back into focus by the major role that Ireland’s
lenders played in forcing Dublin into a bailout.

Javier Ariztegui, deputy Bank of Spain governor, on Friday
urged the country’s unlisted regional savings banks, hard hit by
a burst property bubble, to push ahead with mergers and said the
results of additional stress tests would be ready by late March.

In the meantime, the banks needed to continue efforts to
clean up their balance sheets and show greater transparency,
particularly in detailing quarterly results.

The extra stress tests — which would be published ahead of
parallel checks due to be conducted in other parts of the EU —
would cover “complementary information on promotion and
construction, on residential mortgages, detailing collateral and
corresponding loan-to-value ratios,” he said.


Economy Minister Elena Salgado said Spain’s public finances
were healthier than expected and it would issue less debt than
originally planned by year end but without changing the number
of auctions.

With a nominal gross domestic product larger than Greece,
Ireland and Portugal combined, Salgado told Reuters this week
she believed speculation against Spain was a bet against the
single currency. See [ID:nLDE6AN1EX]

The prime ministerial source denied Spanish newspaper
reports other euro zone countries have put coordinated pressure
on Spain to announce more measures though said there were many
different views in the currency area.

“There are people who want gestures,” he said.

He also said Spain had at times been irritated with comments
from German policymakers that it saw as doing more harm than
good, but denied Germany and Spain differed over how to sustain
the euro.

On Wednesday, Salgado urged Germany not to push its idea of
involving private sector investors in any future euro zone
rescue plan.

Analysts and economists have said Spain may announce a
second round of mergers for its privately held savings banks,
many of which collapsed after a 10-year property boom went bust
in 2008.

But Spanish officials say the savings banks have almost
completed restructuring and that foreign investors will come
into the sector soon.

“The government is really choosing between a lot of short
straws, but one which has less direct social impact is to put
more pressure on the savings banks to complete the
restructuring,” an analyst with the Ortega y Gasset Institute,
Ismael Crespo, said.

(Reporting by Manuel Ruiz, Paul Day, Martin Roberts, Robert
Hetz and Judith MacInnes; Editing by John Stonestreet)

UPDATE 3-Spain pledges more bank health checks, debt updates