Spain actions to reassure investors

MADRID - facing growing pressure from the financial markets, Spanish authorities promised to open the books of two groups of borrowers, their need for cash of grueling skittish investors are.

Officials required investors an early look at the finance funds give regional governments. Central Bank is now the country's acceleration plans to regional savings banks to provide more information on your loans and the amounts to force you need to borrow. It hopes to suppress fears increasing investor that the banks with a view to a cash crunch or hide real estate losses could be.

Investors drove this week to Spain's cost of borrowing amid concerns that the next country need a bailout for Greece and Ireland and Portugal might be. In particular you have worried that Spanish regions that have a high degree of political autonomy, the country's efforts to the budget deficit could derail slash.

These fears, address Monday Spain public make the finances of the country regional Governments for the first nine months of the year. It had planned these figures next year.

This week, investors service warned Moody's it possibly lower Spanish debt evaluation due to the country's relatively high refinancing needs next year and the possibility that it could have to inject fresh capital into its banks.

Friday's delivered the country the Baa1 from Aa2, keep Moody's also bad news after Ireland, downgrading their negative Outlook. The ratings company said the Government which of his ailing banks or slower than expected growth of the Irish economy could worsen financial strength due to pressure.

"Ireland's sovereign credit rating from the repeated crystallization of bank-related contingent liabilities in the Government balance sheet, has suffered", said Dietmar Hornung, Vice President, senior credit officer of Moody's.

Spain insists that it is not in the same situation as Ireland or Greece. It is betting, that investors come view the inner workings of banks and regional governments will see once you.

In a sense, Spain is an unlikely candidate for a bailout: the Government have not much debt. After a generous stimulus plan and a slump that blew a huge hole in his accounts, only 46% represented Spain central government debt its economic output at the end of last year. This compares with 65% for Ireland, 109% for Italy and 138% for Greece.

But Spain's government debt is only the tip of the iceberg. Regions, banks, companies and households of the country also borrowed heavily in the boom years - and history suggests the Government could at the end of this debt to shoulders.

"Spain's problem not public debt - it is private debt," says Emilio ontiveros, a private Spanish Economist.

Another problem: many of these Spanish borrowers will be refinance its debt next year at a time, investors are nervous at European risk. According to Moody's Spanish central Government must around €170 billion (US$ 225 billion) in 2011, up to € 30 billion by regional Governments of the country increase.

Spanish banks, whose own fähigkeit to raise funds for the fate of the Spanish Government is closely linked, must refinance debt in € 90 billion next year, added to it. The Government has a special facility for banks to write down if necessary, set up with a lending capacity of up to 99 €. This Fund is likely to have, more Government supported bonds issue next year.

Some investors make that so many Spanish borrower each other from the market in ways push, to finance the ability of the Government itself to reasonable prices could hurt. That you say the chance which Spain will have to contact Monetary Fund for a bailout of the European Union or the international raises.

"We have a sword of Damocles hanging over our heads," said Juan José Toribio, an economist and former IMF official now at the IESE Business School.

Spain's dilemma shows that the crisis in the euro area not only because of the lavish southern European Governments spending too much, as it happened in Greece. Instead pain inside Spain pointing to a different culprit: the euro.

Adoption of the single currency 1999 interest rates on the edge of the euro zone sent tumbling, as the risk of a devaluation of the currency removed one. Spain, you fell below the inflation rate - i.e., were negative in real terms - create a great incentive to borrow.

The Government was restricted by the Maastricht criteria, which lent its entry into force of the euro, but Spanish households and businesses with gusto regulated. Credit fueled their cheap money in the construction of new houses, inflating a 15 year cast construction bubble that has implodierte with devastating consequences.

-Art Patnaude contributed to this article.

Write toThomas Catan thomas.catan@wsj.com and Jonathan House at jonathan.house@dowjones.com

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