Spanish Budget Minister Cristobal Montoro attacked the European Central Bank for lacking commitment to the currency union and failing to warn Spain about the risks of its foreign borrowing.
“We need clear rules and institutions that are committed to them,” he told the Spanish senate today, according to a version of his speech the ministry distributed by e-mail. “There can be no banking union without a central bank like that of the United States.”
Montoro joined Foreign Minister Jose Manuel Garcia Margallo in criticizing the central bank even as their colleague, Economy Minister Luis de Guindos, courts policy makers in northern Europe to win support for Spain’s bid to rein in its debts and restart its economy.
The extra yield investors demand to hold Spanish 10-year debt instead of German bunds touched a record 650 basis points yesterday before ECB Governing Council member Ewald Nowotny said policymakers may consider granting the European bailout fund a banking license to boost its firepower.
Yields tumbled further today before Montoro spoke as ECB President Mario Draghi pledged to do whatever is necessary to defend the currency union. Spanish 10-year yields fell as low as 6.928 percent, their lowest level in more than a week.
Garcia Margallo said on July 21 that the ECB was “hiding” as it declined to intervene while Spanish yields soared, according to a report in Frankfurter Allgemeine Zeitung. Last month, he said German lenders helped cause Spain’s debt crisis through profiteering. Montoro said today that institutions such as the ECB didn’t warn Spain enough about the risks of taking on too much external debt.
If Germany “throws one country to the wolves that will affect everyone, so they should take a more long-term view,” Garcia Margallo told Onda Cero Radio on June 14.
De Guindos won support from German Finance Minister Wolfgang Schaeuble at a meeting in Berlin this week after which they issued a joint statement praising Spain’s budget-cutting efforts and arguing the country’s surging borrowing costs exaggerate the problems in its economy. De Guindos also negotiated an interest rate of 1.5 percent for Spain on as much as 100 billion euros ($123 billion) of loans for bailing out the country’s banks.
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