TOKYO – Spain could get a precautionary credit line from the euro zone's permanent bailout fund with the possibility of buying Spanish bonds at primary auctions, if Madrid decides to ask for financial help, the EU's top economic official said on Friday.
"There is no request from Spain. I know the Spanish government is open to consider this. The European Commission is ready to act as soon as a request comes from Spain," EU Economic and Monetary Affairs Commissioner Olli Rehn told Reuters in an interview.
The permanent bailout fund, the 500 billion euro European Stability Mechanism (ESM), can offer euro zone governments, among other instruments, an Enhanced Conditions Credit Line (ECCL).
Asked what kind of instrument would best suit the needs of Spain, whose borrowing costs are uncomfortably high, Rehn said:
"My view is that it will have to be a combination of the European Stability Mechanism and the European Central Bank's Outright Monetary Transactions."
"We have in the new toolbox of the ESM, a precautionary credit line, which is called enhanced conditions credit line. It facilitates the kind of primary debt market interventions of Spanish government securities that we would have in mind in case there would be a request, which would then, on a parallel track, be obviously supported by the ECB's Outright Monetary Transactions," Rehn said.
(Reporting By Jan Strupczewski)