Monday

20th Jan 2020

Markets wary despite extra round of Spanish cuts

  • Madrid: the finance minister changed the subject when asked by press to rule out a bail-out (Photo: cuellar)

The EU has welcomed Spain's plan to cut another €10 billion off its yearly budget, but the measure failed to stop speculation the country could be next in line for a bail-out.

Olivier Bailly, a European Commission spokesman, on Tuesday (10 April) said Brussels "welcomes" the move because it "confirms both the Spanish government's determination to implement the necessary reforms, and furthermore the Spanish government's commitment to respect the 5.3 percent [of GDP] deficit [limit agreed] for 2012."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

He approved the move despite the fact the new cuts are mainly to hit education and healthcare.

The €10 billion savings are to come on top of €27 billion of cuts promised on 30 March. But Spain's financial credibility has taken a battering in recent months, with the new centre-right government of Prime Minister Mariano Rajoy forced to admit the country's economic situation is worse than previously thought.

Markets on Tuesday pushed the costs of 10-year Spanish bonds to almost 6 percent, prompting press to ask whether Madrid will need a Greek-type bail-out.

The country's economy minister, Luis de Guindos, when asked in Madrid on Tuesday morning if he could categorically rule out an international rescue package declined to answer the question.

Spanish central bank chief Miguel Ordonez in a separate press event said the European Central Bank has "never" discussed a Spanish rescue. But he added that Spain's economy is unlikely to see a recovery any time soon and that its banks might need an injection of public capital.

The new Spanish cuts are expected to see hikes in university fees for students and the imposition of healthcare charges for high-earners.

"Too much austerity as we have seen in Greece and in Portugal can undermine economic fundamentals and make it harder to meet fiscal targets. On the other hand, markets are demanding such confidence-building measures that aim to ensure debt sustainability and thus ultimately debt repayment," Thomas Herrmann, an economist at the Credit Suisse bank told EUobserver.

He added that some euro governments are facing a no-win situation in terms of market psychology.

"They're trying to pull new measures out of the box and the markets are reacting badly. If you come up with new measures, this can in itself be interpreted as meaning that you are admitting that you have a problem."

But with social unrest flaring up afresh in Greece, the mental state of city traders is not the only worry for policy-makers in EU capitals.

A home-made bomb using five gas canisters exploded outside the Administrative Reform Ministry in Athens on Monday in protest at the bureau's task of cutting tens of thousands of public sector jobs.

The Greek authorities played down the incident. But anonymous police sources told the Reuters news agency it could have caused injury because there was no warning and the building is in a busy area.

The attack comes after a 77-year-old pharmacist shot himself in central Athens on 4 April to protest what he said was his loss of dignity in the face of cuts.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

News in Brief

  1. 'No objection in principle' on Huawei cooperation, EU says
  2. French aircraft carrier goes to Middle East amid tensions
  3. EU suggests temporary ban on facial recognition
  4. EU industry cries foul on Chinese restrictions
  5. 'Devil in detail', EU warns on US-China trade deal
  6. Trump threatened EU-tariffs over Iran, Germany confirms
  7. EU trade commissioner warns UK of 'brinkmanship'
  8. Germany strikes coal phase-out deal

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us