Spanish Economy Minister Luis de Guindos urged the European Central Bank to introduce measures to heal divisions in the banking market, tempering Prime Minister Mariano Rajoy’s call for the central bank to match the quantitative easing in the U.S. and Japan.
The higher financing costs faced by companies in Italy and Spain compared with northern Europe are holding back economic growth and encouraging depositors to shift savings to banks in the core euro countries, de Guindos said during a debate in Madrid today.
Asked what action he’d like from the ECB, de Guindos said, “I’d underline the fragmentation of the capital markets.”
“That concerns the ECB because it shows the mechanism of monetary transmission isn’t working,” he added.
Rajoy went further yesterday, arguing European Union leaders should give ECB President Mario Draghi political backing to flood the economy with money matching the efforts of the other central banks in developed economies. The ECB is drawing up proposals for channeling credit to smaller companies in the periphery and Draghi last week said it may cut interest rates to a record low.
“Companies in Italy or Spain that may be in a better situation than those in the north are paying more,” de Guindos said today. “As a result we may see movements in deposits which are not ideal.”
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