Bonds News

UPDATE 1-Spain's next PM seeks financial info before acting

* Incoming People’s Party seeks finance details

* Rajoy to consult with opposition leaders

* Eyes on Dec. 8 European People’s Party meeting

MADRID, Nov 23 (Reuters) - Spain’s leader-in-waiting will resist international pressure to reveal detailed economic plans while he searches for financial skeletons in the closet and courts the opposition, party officials and analysts said on Wednesday.

Mariano Rajoy, known as a cautious public administrator, won Sunday’s election by a landslide as voters threw out a seven-year-old Socialist government blamed for sky-high unemployment and economic malaise.

The Centre-right People’s Party (PP) leader campaigned on promises to restore confidence on financial markets and he is expected to slash spending and bring in business-friendly economic reforms.

But analysts and officials from his party said he would not be rushed despite the intensity of the euro zone debt crisis that has forced three countries to take international bailouts.

“You can’t put together a package of measures until you know exactly what kind of public spending effort you’re confronting,” Miguel Arias Canete, the PP campaign coordinator and tipped for foreign minister, said on Onda Cero radio on Wednesday morning.

Greece’s debt crisis spilled into the open after George Papandreou won election in 2009 and found the budget deficit that year would be three times greater than the previous government’s estimates.

He failed to prevent the crisis escalating into a threat of Greek bankruptcy and had to step down earlier this month.

Over the past year, as the PP has won elections in various regions of Spain, it has complained that the Socialists left public accounts in bad shape, leaving off the books stacks of past-due bills to suppliers.

Everyone from Fitch debt rating agency to German Chancellor Angela Merkel has urged Rajoy to take rapid steps, but under Spanish law he will not formally take office until somewhere between Dec. 16 and Dec. 20.

With Spain’s borrowing costs at 14-year highs the transition delay will be agonizing. Spain’s 3-month Treasury bills auctioned on Tuesday were sold at a yield of 5.110 percent.

A PP transition team met members of the outgoing government on Wednesday, but no details of the conversations were released.

“Members of his economic team have said they’re going to look at the labour reform, but they haven’t said what they’re going to do,” said Antonio Cabrales, economy professor at Carlos III University in Madrid.

“The same with fiscal consolidation. All we hear is ‘We’re not going to touch this, we’re not going to touch that....’ Okay, fine. What are you going to touch because fiscal consolidation is a priority? It made me very nervous during the election that he didn’t say anything,” Cabrales said.

On the campaign trail Rajoy pledged to protect the national health and education systems even while slashing spending. But many Spaniards believe the welfare state will be vulnerable now that the election has been won.

The president of Catalonia, a wealthy and highly indebted region in northeastern Spain, on Tuesday announced pay cuts for state workers and tax hikes. Catalonia’s high public deficit is considered a liability for the central government as it tries to hit ambitious deficit reduction targets.


Spanish news agency EFE reported that Rajoy would take details of his economic plan to a Dec. 7-8 meeting of European People’s Party leaders in Marseilles, specifically to present them to French President Nicolas Sarkozy and German Chancellor Angela Merkel. A party spokeswoman said she could not confirm the report.

“He must gain the explicit confidence of the European leaders who count the most,” said Pere Puig, economy professor at Barcelona-based ESADE business school.

It remains unclear whether Rajoy will accompany outgoing Socialist Prime Minister Jose Luis Rodriguez Zapatero to a European Union summit on Dec. 9.

The IMF unveiled on Tuesday beefed-up lending instruments that could help countries with solid policies that may be at risk from the euro zone debt crisis.

Spain was not named specifically and it was not clear whether the liquidity option was appropriate for its situation. In any case, analysts said precautionary credit lines send a dangerous message.

“It’s good news but a bad sign,” said Santiago Sanchez, economics coordinator at the Flores de Lemus Institute at the Carlos III University in Madrid.

Alfredo Pastor, economics professor at IESE business school in Madrid, said Rajoy would be acting with his hands tied behind his back if he named ministers who will not be able to act for a few weeks.

The People’s Party won an absolute majority in Spain’s lower house, with 186 seats out of 350.

But as voters rejected the Socialists they also turned to many smaller parties that made important gains in parliament, including leftist and regionalist parties from Catalonia and the Basque country.

Analysts said that given that austerity measures would be painful and could set off demonstrations in the streets, it was important that Rajoy consult with opposition leaders to form as broad a consensus as possible.

“He has to reach agreement with the main parties, the opposition... This is what the country is asking for. Not a coalition government but agreement on two or three areas,” Pastor said.

Despite spending cuts already implemented, Spain is expected to miss its deficit reduction target this year, which means even more severe belt tightening to reach the 2012 goal of a deficit equal to 4.4 percent of gross domestic product.