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Rajoy wants better bailout terms

Spanish Prime minister Mariano Rajoy has vowed not to accept unreasonable conditions if Spain seeks a bailout from the European Union.

Rajoy made his pledge during his first ever television interview but added that no decision on whether to request a bailout would be taken. Spain has already received aid of up to €100 billion from the Euro zone in its bid to shore up the countries failing banking system. The Spanish government has made it clear that it could seek a sovereign bailout once the Euro zones leaders spell out the exact conditions they would have to meet to get one.

ECB president Mario Draghi on Thursday unveiled details of an unlimited bond-buying programme to ease the rates being paid by Spain and Italy for their sovereign debt. But he said the bank would only act after a request to the euro zone rescue fund, something that would come with strict conditions.

“I am absolutely convinced that everyone will be reasonable but I insist that we haven’t taken a decision,” Rajoy told Spanish state television in his first TV interview since winning power more than nine months ago. “I will look at the conditions. I would not like, and I could not accept, being told which the concrete policies were where we had to cut, the first instruction I gave to the finance minister who is drawing up the budget is that the people it shouldn’t affect are the pensioners.”

Many Spanish citizens are angry with their leaders as Rajoy has already reneged on his election promise to not raise taxes. Taxes are set to increase by as much as 40% over the next two years, hammering a population that is already struggling to deal with rampant unemployment and civil unrest.

Rajoy has already raised income tax and value-added tax and pushed through billions of Euros of austerity cuts, including in public services like education and health, but has not cut pensions. Pensions would not be scaled back in the 2013 budget, he promised.

The worst case scenario for Spain and Rajoy would be if Spain (one of Europes biggest economies) goes the same way as Greece, a country that is effectively a lost cause unless drastic action is taken, a situation that the rest of Europe has little appetite for.

The Euro has extended its gains against the US Dollar, rising to its highest level for four months after the German Constitutional Court confirmed that it will announce its verdict over whether the Euro zones rescue fund is legal on Wednesday. The single currency is trading at its highest level since May 22nd.

The Pound to Euro exchange rate is currently trading at 1.252

The Pound to US Dollar exchange rate is currently trading at 1.602

The Pound to Australian Dollar exchange rate is currently trading at 1.544

The Euro to US Dollar exchange rate is currently trading at 1.279

The Euro to Pound exchange rate is currently trading at 0.798

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