Spain denies 'senseless' IMF bailout rumours

The logo of the Bankia bank is seen on a wall in Madrid Many are wondering how Spain will pay for a Bankia bailout

Spain's economy minister has dismissed talk of it seeking a bailout from the International Monetary Fund (IMF) as "senseless".

And the IMF denied that Spain had asked to discuss rescue loans.

The IMF has contributed to bailouts of all the other eurozone nations, such as Greece, that needed help.

Meanwhile, the European Central Bank (ECB) president Mario Draghi described the current set-up of the eurozone as "unsustainable".

There were rumours that Spain had already gone to the IMF, after the Spanish deputy prime minister went to meet the IMF's managing director Christine Lagarde.

"My desire is to not come out and deny these rumours because they are senseless," Spanish Economy Minister Luis de Guindos said on Spanish television.

Spain has taken Greece's place as the epicentre of the eurozone crisis as concerns over the health of Spanish banks have shaken markets.

Bankia, Spain's fourth largest bank, has asked for another 19bn euros (£15bn) recently from Madrid, but many question whether Spain will be able to afford it.

Eurozone 'vacuum'

Speaking to the European Parliament, Mr Draghi said: "Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is no. Can the ECB fill the vacuum of the lack of action by national governments on the structural problem. The answer is no.

"The next step... is to clarify what is the vision a certain number of years from now. The sooner this is specified, the better it is."

And EU economics commissioner Olli Rehn said more austerity was needed if the eurozone was to avoid disintegration.

Mr Rehn talked down the idea of European states issuing joint bonds, saying that austerity and closer co-operation were needed.

"We need a genuine stability culture and a much upgraded common capacity to contain common contagion," he told a conference.

New figures also showed eurozone inflation slowed more than expected this month.

Inflation in the 17 countries that use the euro eased to 2.4% in May from 2.6% in April.

The figure is still above the ECB's target to keep inflation below 2%, but the lower-than-expected number could fuel calls for an interest rate cut next week.

Mixed data

In other figures released on Thursday, Germany's unemployment rate fell below 7% as Europe's biggest economy continued to perform strongly.

The jobless rate dropped to 6.7% in May, from 7% in April, as the number of people unemployed fell by 108,000 to 2.86 million.

However, there was more bad news from Greece as figures showed that Greek retail sales volumes fell by 16.2% in March compared with a year earlier. This followed February's decline of 12.9%.

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