Euro rises on hopes of Spain seeking funds

Indications that Spain, yet another troubled European nation, would seek financial aid to help it bail out of a debt crisis saw the euro gain against the US dollar on Friday.

The euro rose 0.1 per cent to $1.2987, after touching a high of $1.3047 on Friday. The currency had touched a four-and-a-half month peak of $1.3169 earlier in the week.

Spain is the fifth of the notorious debt-ridden PIGS (Portugal, Italy/Ireland, Greece, Spain) economy in Europe that to have been battered the euro zone nations. Its reluctance to apply for external aid has sparked uncertainties in the markets. The European Central bank has promised to buy short-term bonds of the troubled euro zone countries, but only after they seek such help.

Wolfgang Schaeuble, the German finance minister, added to the woes of jittery markets on Friday, when he said Spain did not need a sovereign bailout as the package that has already been agreed was adequate.

Along with Italy, which is also facing a debt problem, Spain has been reluctant to seek help from the ECB, after Mario Draghi, its president said that the aid would have to come along with conditions. Spanish Prime Minister Mariano Rajoy and his Italian counterpart Mario Monti have been reluctant to seek help after Draghi's statement about the imposition of stiff conditions.

Gianfranco Polillo, Italy's undersecretary of finance, said in Rome that no nation would voluntarily go to an international body and surrender national sovereignty for financial help. Spain's deputy prime minister, Soraya Saenz de Santamaria, said his country would consider seeking a bailout only if the conditions imposed are acceptable.

Leaders of countries confronting the debt crisis met in Rome on Friday to discuss issues relating to austerity measures and the conditions being imposed by the rich nations.

Italy's economy is expected to shrink by 2.4 per cent this fiscal, double the previous projection. The recession is expected to continue well into 2013 as well. Italy's public debt is expected to be the second highet in the euro zone, just after Greece's. But Monti, who replaced Silvio Berlusconi last November, has unveiled 20 billion euros of austerity measures to tackle the debt crisis.