Spanish Prime Minister Mariano Rajoy said he will urge other European Union leaders at a summit tomorrow to move more urgently to reduce unsustainably high interest rates.
EU leaders must use the “available instruments” to stabilize markets, Rajoy said in Parliament today, as Spain’s 10-year bond yields surged toward the 7 percent level that prompted full bailouts in other euro members.
“The most important thing today is being able to finance ourselves in the markets, that’s the main issue, and on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” Rajoy said. “We can’t finance ourselves at the prices we are paying for very long.”
EU leaders convene in Brussels June 28-29 for their 19th summit since the debt crisis started as pressure builds on German Chancellor Angela Merkel to make concessions to solve the two year-old crisis. Their talks will focus on a 10-year road map released yesterday by four officials led by European Union President Herman Van Rompuy.
The plan centers on common banking supervision and deposit insurance and a “criteria-based and phased” move toward joint debt. It also suggests that the EU could impose upper limits on annual budgets and debt levels of nations that use the euro.
Merkel is increasingly isolated as French President Francois Hollande, Italian Prime Minister Mario Monti and Rajoy unite to push for quicker action to ease the sovereign debt crisis. The three leaders back the creation of joint euro-region bonds, which Merkel opposes, and are pushing for measures to spur growth. The four leaders met in Rome on June 22 and their finance ministers spoke in Paris late yesterday.
Spain formally requested a European bailout for its banks on June 25 and discussions continue as to what conditions lenders will have to meet and whether the loan of as much as 100 billion euros ($125 billion) would take precedence over other debts in the event of default.
Rajoy today said he will fight so that European rescue loans “aren’t superior to the rights of other creditors of public debt.” Germany, Finland and the Netherlands want official loans to Spain to be repaid first in the event of default, undermining the interests of existing bondholders, two European officials said this week.
Rajoy also backs a so-called banking union, which he says includes joint deposit-guarantee funds and would allow the European rescue funds to recapitalize banks directly without going through the government. Germany also rejects those proposals.
Euro-area finance ministers will discuss the situation in Spain and Cyprus on a conference call starting at 1 p.m. Brussels time today, two EU officials said.
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