Eurozone Crisis: Spain Ready for Bailout, but Germany Urges to Wait

Spain plans to ask for a euro zone bailout next weekend but Germany had made it clear that it should hold off.

Another boom in the eurozone’s debt crisis comes as Madrid is pressured to seek a rescue programme that would trigger European Central Bank buying of its bonds. Photo: journalforeignrelations/Flickr

“The Spanish were a bit hesitant but now they are ready to request aid,” a source revealed. Three other senior euro zone sources, who wished to remain anonymous as they are not allowed to discuss the matter, confirmed Spain’s plans to request a bailout.

German Finance Minister Wolfgang Schaeuble suggested that Spain is on its way to overcome its fiscal problems and does not need a bailout. He went on, adding that investors will recognize and reward Spanish reforms in due course.

Several European diplomats and a senior German source exclusively revealed to reporters that Angela Merkel doesn’t want to provide for distressed euro zone countries more individual bailouts.

“It doesn’t make sense to send looming decisions on Greece, Cyprus and possibly also Spain to the Bundestag one by one,” the senior German source said. “Bundling these together makes sense, due to the substance and also politically.”

As rumors claim, there were tense exchanges at a euro zone ministerial meeting in Cyprus in mid-September when Schaeuble announced that Berlin could not take another bailout for Spain to parliament so soon after lawmakers approved up to 100 billion euros ($129 billion) to help Spanish banks in July.

When asked about the reports that Germany was urging Spain to put its request off, a German government spokesman told reporters: “Every country decides for itself. Germany isn’t pushing in one direction or the other.”

A spokeswoman for Spain’s Prime Minister Mariano Rajoy said she was not acknowledged of any veto from Germany for an aid request.

“What we are focused on is to get the decisions of the June summit on the banking union implemented. That would send a strong message of confidence to the markets,” she said.

To save its economy, Spain needs to refinance some 29 billion euros in maturing debt – including 9 billion in short-term paper – by the end of October, Reuters reports.

According to Eurozone sources, under one option under consideration, Spain was ready to submit the request at the weekend, with German agreement, so euro zone finance ministers could discuss it at their next regular meeting in Luxembourg next Monday.

Even if Spain receives a bailout, the crisis will not go away. Increasingly the eye of the storm is what is happening in the real economies and in people’s lives.

The figures that have recently come out of Greece were shocking. The economy will contract by nearly 4% next year – that’s the sixth year of recession. Unemployment is predicted to reach up to 24.7%, while its public debt will increase to 346bn euros.

In the eurozone as a whole 11.4% of population is unemployed. A historian, Felipe Fernandez-Armesto says that: “Fears of a social meltdown are excessive but not baseless.”

“From the streets of Athens, to Madrid, to Lisbon, to Paris, to Rome you can sense the frustration growing,” BBC writes.

“The future of the eurozone may not be determined by summits but by the people who might, in the end, reject austerity as the price of supporting the single currency.”

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