* Schaeuble dismisses talk Spain wants fund to buy its bonds
* Says Spain needs time but markets will reward its reforms
BERLIN, July 28 Germany's Finance Minister
dismissed reports Spain is about to ask the euro zone bailout
fund to purchase its bonds, and talked down fears about its
spiralling borrowing costs in an interview with Welt am Sonntag
newspaper made available on Saturday.
"Spain's financing needs in the short-term are not so high.
High interest rates are painful and they create a lot of
uncertainty, but it is not the end of the world, if you have to
pay a few percent more at a few bond auctions," Wolfgang
Asked if there was any truth to speculation that Spain would
shortly ask the euro zone rescue fund for help via buying its
bonds, Schaeuble answered: "No. There is nothing to these
Spanish borrowing costs this week hit euro-era highs as the
return investors demanded to hold 10-year bonds soared to 7.78
percent. Yields then fell back below 7 percent on expectation
the European Central Bank (ECB) could take bold action,
following ECB President Mario Draghi's pledge he would do
whatever it takes to safeguard the single currency.
Ten-year yields above 7 percent have proved to be a tipping
point leading eventually to bailouts for other countries in the
Asked about fears that Spain might not be able to sell its
bonds Schaeuble said: "We know about these concerns. This is why
we tied up an aid package that was sufficiently large. Spain
will get up to 100 billion euros to recapitalise its banks and
of this we have made 30 billion euros in the European Financial
Stability Facility (EFSF) available as a potential immediate
Schaeuble held talks with Spain's Economy Minister Luis de
Guindos in Berlin this week.
"[The Spanish government] has taken all necessary decisions
and is implementing them. It deserves respect for this...
Financial markets have not yet rewarded Spain for these reforms
but that will come," Schaeuble said.
"You lose trust quickly, but can only restore it over time.
Spain needs time. The reform programme will have good effects -
also on financial markets," he added.
Madrid has launched a fresh 65 billion euro package of tax
rises and spending cuts designed to chip away at its debt
mountain but it will also probably drive the economy deeper into
Spain needs to shift around 38 billion euros in medium and
long-term paper by year-end and about 35 billion in bills. Their
average yield so far this year is below 2011.
(Reporting by Alexandra Hudson; editing by James Jukwey)