GERMANY’S FINANCE MINISTER is rejecting talk of a possible application from Spain for the eurozone’s bailout fund to buy the struggling country’s bonds, a newspaper reported today.
This week, European Central Bank head Mario Draghi promised to do “whatever it takes” to preserve the euro and German and French leaders said that they were “determined to do everything to protect the eurozone.”
Although neither mentioned any specific action, the comments raised expectations that the ECB – or the eurozone’s temporary rescue fund, the European Financial Stability Facility – might step in to buy Spanish government bonds and lower the country’s borrowing costs, which have been at worryingly high levels in recent weeks.
Still, German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper that Spain’s short-term financing needs are “not so big”.
Asked about talk that Spain could soon make an application for the eurozone rescue fund to buy bonds, he replied: “There is nothing to this speculation.”
The high interest rates are painful and they create a lot of concern – but it’s not the end of the world if one has to pay a few percent more at a few bond auctions.
He added that an aid package worth up to €100 billion to help Spain’s banks, which are laden with soured investments following a property sector collapse, is large enough. Spain’s budget-cutting and economic reform efforts will have positive effects on the financial markets, he insisted.
Spanish officials have been adamant that the country, the eurozone’s fourth-largest economy, will not seek a full-scale bailout along the lines of those given to Portugal and Ireland as it battles with a persistent recession.
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