* Spain pressed Ireland, Portugal to seek bailouts
* Madrid now holding back from applying due to political
* Other potentially vulnerable states press Spain to apply
By Jan Strupczewski and Fiona Ortiz
BRUSSELS/MADRID Sept 24 Spain once pushed hard
for Ireland and Portugal to ask for bailouts from their partners
in the euro because it was keen to shelter itself from an
accelerating sovereign debt crisis.
Now the tables are turned and Madrid is holding back from
applying for help, not least because the Spanish government
knows all too well what befell its Portuguese and Irish peers
once they did seek help -- voters dumped them.
Facing an important regional election on Oct. 21, Prime
Minister Mariano Rajoy is in no rush to yield to nervous pleas,
from France, Italy and indeed Ireland, that he request a rescue
deal that might dampen investors' concerns about their own debt.
Dublin and Lisbon fought shy of EU and IMF help for long
months in 2010-11, fuelling turmoil in the bond markets, in
forlorn attempts to avoid a humiliating loss of sovereignty and
lenders' demands that they draft unpopular budgets.
Now Rajoy, in office for nine months, is doing the reverse
of what his Spanish predecessors urged on others, and insisting
Madrid may not need help -- at any rate not right now.
Part of the procrastination is down to Rajoy's personality.
The dour conservative Gallego from rainy northwestern Spain
built his career on digging in his heels and letting everyone
else wear themselves out until he decides he's ready to act.
People in Rajoy's homeland, Galicia, are renowned for being
noncommittal and answering a question with a question. Meet a
Gallego on the stairs, a Spanish saying goes, and it's hard to
tell whether he is going up or coming down.
"Rajoy is resistant. That's his life. He prefers to take a
bad decision in three months to taking a good one tomorrow,"
said a former government official from Rajoy's People's Party.
Such is Rajoy's poker-faced ambiguity that even longtime
associates cannot tell when he will come off the fence.
This month's offer of potential support from the European
Central Bank has eased Spain's borrowing costs somewhat, giving
Rajoy a breathing space. Germany, whose voters dislike funding
bailouts, has also made clear there should be no rush.
But tension remains, with those leaders most concerned about
their own debt levels fretting that Spanish delay could unsettle
markets and raise the risks they too may need some form of help.
"Spain was much in favour of moving quickly in the case of
Portugal, to cut contagion," said a senior euro zone official,
recalling pressure from Madrid in the months before Lisbon
finally applied for a bailout programme in April.
"It's clear that countries such as France and Italy would
like to see a request from Spain coming soon," the official
said. "But Germany, for instance, is clearly not in hurry."
In Portugal, domestic banks played a part in pushing a
reluctant government into the arms of the IMF by disclosing that
the European Central Bank had urged them not to increase their
exposure to Lisbon's debt.
Spain's big banks are starting to play a similar role in
The government should seek precautionary credit "the sooner
the better," Francisco Gonzalez, the influential chairman of
giant Spanish bank BBVA, said on Thursday.
Rome and Paris reason that the sooner Spain applies for
help, the smaller the damage to investor confidence in the euro
zone as a whole and the greater the chance of finally breaking
the chain reaction of debt crunches.
Wary of hurting Spanish pride, officials are using
diplomatic language to convey the message.
"We have to respect the fact that Europe is made of 27
member states and each of them is sovereign and it is
particularly true in the case of an important and proud country
like Spain," French Finance Minister Pierre Moscovici said.
"But if at one stage they want something from the European
Union, the tools are there," he told Reuters TV last week.
Irish Finance Minister Michael Noonan was slightly more
explicit. "I'd like them to set out their position because it
hasn't been clear over the summer what their position is,"
Noonan said ahead of a euro zone finance ministers' meeting in
Cyprus on Sept 14-15.
Ireland, which Spain pressed to accept a foreign bailout in
late 2010, has its own reasons to want Madrid to follow suit. It
is concerned a shaky euro zone debt market will thwart Dublin's
hopes of returning to the open market to raise funds next year.
A contrary logic is coming from Berlin, where the government
faces an election in a year's time. With public opinion against
paying to bail out other states, Germany insists the euro zone
rescue funds -- the European Financial Stability Facility (EFSF)
and the European Stability Mechanism (ESM) -- are not mere
conveniences to provide cheaper funding for governments.
For Germans, the funds are a last resort and as long as
Spain can finance itself on the market and yields are relatively
stable, albeit high, then using the bailout method to help Spain
would be difficult to sell to the German parliament.
Austrian Finance Minister Maria Fekter made that case last
week when she said: "The goal is not to get as many countries as
possible under a programme, but to keep them stable enough so
that they do not need a programme."
Investors now charge Spain more than one percentage point
less in interest for 10-year bonds since the ECB said it could
buy potentially unlimited quantities of short-term bonds on the
But ECB action is conditional on a Spanish application to
the euro zone bailout funds and an agreement to implement fiscal
and economic reforms under strict international supervision.
Some investors are counting on Spain asking for a bailout at
an EU summit on Oct. 18-19. But several EU officials in Brussels
said they expected Rajoy to wait until after a regional election
in his home state of Galicia on Oct. 21, when his party has a
chance of winning a full majority in the local parliament.
To reduce the stigma of being told how to fix its economy by
outsiders, Spain will present a new package of reforms later
this week, as well as a budget for 2013.
This could enable Rajoy to apply for a bailout to unlock ECB
bond-buying if yields start to rise again while keeping any new
conditions to a minimum and reducing political embarrassment.
The big question is how long the markets are prepared to wait.
As France's Moscovici said last week: "My impression is that
we still have a bit of time."