May 28, 2012 / 9:31 PM / 7 years ago

Spain can count on aid from abroad: Polish cenbanker

LIMA (Reuters) - Spain could count on a firewall of international funding if its troubled banks need further recapitalization, but the depth of its problems pale next to those of Greece, Poland’s central bank governor said on Monday.

Investors are growing increasingly concerned Spain could be forced to seek an international bailout the euro zone can barely afford even though Spain’s prime minister has said there will not be any European rescue for Spanish banks.

Polish central bank chief Marek Belka, a former European director at the International Monetary Fund (IMF) who gave a speech in Peru on the difficulties facing the euro, said international funding would be available if Spain needs it.

“Obviously there exists this so-called firewall both in the EFSF (European Financial Stability Facility) and the IMF that should be a guarantee that Spain can count on financial assistance, on bridge financing from abroad,” he said at a conference in Lima.

Belka declined to say if Spain would need such assistance.

“Spain is struggling with the typical weaknesses of southern rim euro zone countries but the extent of those problems is much less than those of Greece, and even of other countries there,” he said.

BFA, the parent company of Spain’s No. 4 Bank Bankia, asked Spain for 19 billion euros ($23.3 billion) in government help and government sources told Reuters the country may prop up Bankia with sovereign bonds. There are also growing concerns about the fiscal health of the country’s regional governments.

Investors lacking confidence in Madrid’s efforts sent Spain’s 10-year bond yields near 7 percent on Monday, a level analysts say isn’t sustainable.

Belka said the challenge not just in Spain but throughout Europe is achieving fiscal consolidation without sacrificing economic growth, pointing to recent elections in France and Greece that showed a rejection of drastic austerity measures.

“I think there will be some sort of changed focus in the discussion in Europe, from fiscal consolidation at any cost to fiscal consolidation light so to say and growth stimuli at the same time,” he said.

Belka said the risk of European crisis contagion to Poland, which is the only European Union member to avoid recession since the collapse of Lehman Brothers in 2008, is less than other countries in the region.

Belka, a former Polish finance minister, said the country’s floating currency, the zloty, has provided it with a “shock absorber” that countries bound to the euro do not have.

Reporting By Caroline Stauffer; Editing by Terry Wade and Kenneth Barry

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