Germany’s governing coalition showed growing exasperation with Spain, as a senior ally of Chancellor Angela Merkel said Prime Minister Mariano Rajoy must stop prevaricating and decide whether Spain needs a full rescue.
“He must spell out what the situation is,” Michael Meister, finance spokesman for Merkel’s Christian Democratic Union, said in an interview in Berlin today. The fact he’s not doing so shows “Rajoy evidently has a communications problem. If he needs help he must say so.”
Meister’s comments underscore Europe’s crisis-fighting stalemate amid discord over a banking union, Greece’s ongoing debate on how to meet bailout commitments and foot-dragging by Spain on a possible aid bid. European Union President Herman Van Rompuy warned today against “a tendency of losing the sense of urgency” in fighting the debt crisis three years after it erupted in Greece.
German patience is running out with Spain as it plays for time after European Central Bank President Mario Draghi offered help to lower borrowing costs in return for strict conditions.
A spokeswoman for Rajoy, who asked not to be named in line with government policy, said the prime minister is implementing the roadmap for economic recovery agreed upon with his European partners. He’s communicating with them and will release next year’s budget and further economic reforms this week.
Meister, speaking in a Bloomberg Television interview, said the priority is for Spain to recapitalize its banks after 100 billion euros ($129 billion) of banking aid was agreed upon. He indicated that he hopes existing Spanish reforms will be enough to fix Spain’s economy “and balance the budget.” Germany is “open” for a full bailout for Spain, yet it cannot come without conditions, Meister said.
“Conditionality will and must apply,” he said. “The German parliament would not accept anything less. If conditionality doesn’t apply it would be only a short step for Ireland to ask for renegotiated terms and Italy might request partial help under those conditional terms.”
The euro slid 0.6 percent to $1.2899 at 2:35 p.m. in Berlin, extending last week’s 1.1 percent decline against the U.S. dollar last week. The currency gained more than 4 percent in the previous two weeks on optimism that ECB intervention and a German high-court decision allowing bailout funding will help provide an endgame to the crisis.
The Euro Stoxx 50 index retreated 1.1 percent following last week’s 0.7 percent drop.
German Finance Minister Wolfgang Schaeuble has signaled opposition to a Spanish application for aid. Schaeuble said Sept. 21 he’s “steadfast” in his opinion that the bank rescue will be enough to see Spain through.
Rajoy has displayed reluctance to seek more help after Draghi unveiled the central bank’s bond-purchase plan, linked to conditions for recipient states, on Sept. 6. Spanish Deputy Prime Minister Soraya Saenz de Santamaria said last week Spain will consider a bailout if conditions are acceptable.
Rajoy “needs to come to terms with the unavoidable stigma that comes with a program,” Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London, wrote in a note yesterday.
Greece’s struggles have only deepened the stigma since its first bailout two-and-a-half years ago. Meister dismissed speculation today that official creditors will be forced to write off some of their exposure.
“How could we possibly do that,” he said. “Where would it stop? We’re talking about loans from as recently as last year. The German parliament would not go with it.”
In Brussels, EU spokesman Olivier Bailly, said talks are under way to leverage the 500 billion-euro European Stability Mechanism. Such tools were adopted -- though never used -- to bolster the temporary fund, the European Financial Stability Facility.
With Italian and Spanish borrowing costs having declined since Draghi’s plan emerged, the two countries are unlikely to request bailouts unless yields jump again, Gianfranco Polillo, Italy’s undersecretary of finance, said in a Sept. 20 interview.
“There won’t be any nation that voluntarily, with a pre- emptive move, even if rationally justified, would go to an international body and say, ‘I give up my national sovereignty,’” Polillo said in Rome. “I rule it out for Italy and for any other country.”
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