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May 26, 2017

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Spanish leader rules out bailout that dictates cuts

MADRID--Spain's Prime Minister Mariano Rajoy ruled out Monday any economic bailout that dictates spending cuts or touches old-age pensions.

As global markets anticipated a rapid international rescue for the eurozone's fourth-biggest economy, Rajoy refused to be rushed into a deal or to contemplate surrendering key powers over the budget.

"I could not accept that they tell us which are the concrete policies in which we have to cut or not cut," the 57-year-old leader said in his first television interview since taking power in December.

Despite a deepening recession, a jobless rate of nearly 25 percent, steep borrowing costs and huge debt repayments due this year, Rajoy refused to touch pensions, nor to make further increases in value added tax.

"If there is one area I won't touch it is pensions," he said, describing pensioners as the "defenseless" and vowing to maintain pensions in the budget for 2013.

"We are not going to touch VAT any more," the premier added, after being forced to raise the top rate to 21 percent from 18 percent so as to cut the public deficit.

Spain has cut a deal with the European Union for a rescue loan of up to 100 billion euros (US$125 billion) for banks hobbled by bad loans extended before a 2008 property market crash.

Rajoy said he believed Spain negotiated "good conditions" for that credit. For any future rescue, he added, "I am absolutely convinced that everyone will be reasonable."

The European Central Bank said last week it would buy government bonds to lower distressed states' borrowing costs but only in return for strict conditions set by eurozone bailout funds.

The ECB announcement alone slashed Spanish borrowing costs on the financial markets and Rajoy's declarations are likely to feed fears that Madrid will now try to delay or even avoid a bailout.

"We still have not taken any decision because I think what we have to do now is see if it is necessary, for the moment the risk premium has come down a lot and so financing is easier," Rajoy said.

"We are studying the situation. We are going to see if it suits us or not, if it is necessary or not, but I will always do what is in the public interest," he added.

"We already know that if we request it they can give us the credit, which is very important," he said.

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