Zapatero reforms increase spain market confidence

Spanish Prime Minister Jose Luis Rodriguez Zapatero’s moves to overhaul banks while changing rules on labor, pension and wages may do more to stem the debt crisis than European plans to reinforce its bailout fund. Zapatero’s cabinet plans to pass new rules for job seekers today, two weeks after approving a draft bill to raise the pension age.

By the end of the month it will pass a decree to bolster lenders’ capital and in March aims to loosen collective- bargaining rules to make it easier for Spanish firms to compete. Spain, emerging from almost two years of recession, is trying to convince investors it can shore up its struggling savings banks without overburdening state finances and having to follow Ireland in seeking a European Union bailout.

The gap between Spanish and German borrowing costs is more than 10 times the average in the first decade of monetary Union, even after easing by a third since Ireland’s rescue in November.

“The working assumption of more and more analysts in Europe is that Spain will be able to pull through on its own,” said Gilles Moec, co-chief economist at Deutsche Bank AG in London. “A lot of that has to do with what they’ve been doing; there’s a lot of market talk about Zapatero’s epiphany.”

Source: Bloomberg