European officials denied „absolutely false” reports Portugal was under pressure to seek a bailout and Spain ruled out on Friday needing help to manage its finances, despite fears of a spreading euro debt crisis.
The Financial Times Deutschland quoted unidentified sources as saying some euro zone states wanted Portugal to seek aid in order to avoid Spain, the fifth largest EU economy, from having to follow suit.
If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal,” the paper quoted a source in Germany’s finance ministry as saying.
EU Commission President Jose Manuel Barroso dismissed the FT report, echoing a vehement denial by Portugal.
I can tell you that it’s absolutely false, completely false,” Barroso said, adding that an aid plan for Portugal had neither been requested nor suggested.
German government spokesman said Berlin was not pressuring anyone to request financial help and said it expected Portugal’s austerity measures – due to be passed later on Friday – to work
The rapid public denials of the FT report suggested some alarm among euro area leaders at the prospect of the debt crisis engulfing ever more of its members.
The cost of borrowing rose again on Friday for Ireland, Portugal and Spain as markets demanded a premium for holding their debt.
Spain has already passed its own austerity budget and Spanish Prime Minister Jose Luis Rodriguez Zapatero „absolutely” ruled out that Madrid would have to follow Ireland and Greece and seek financial assistance
Those who are taking short positions against Spain are going to be mistaken,” he told RAC1 radio.
A rescue aimed at meeting Spain’s financing needs for 2-1/2 years would cost 420 billion euros ($557 billion) according to a Capital Economics estimate, the lion’s share of the 440 billion euro European Financial Stability Facility (EFSF) reserve set up by the euro zone after the Greece bailout.