Wednesday

28th Sep 2016

Merkel: Spain can access aid if needed

  • Relations between Ms Merkel and Mr Sarkozy have been strained recently (Photo: consilium.eu)

German Chancellor Angela Merkel has said eurozone states including Spain are free to call on the bloc's rescue fund whenever needed.

Speaking after a meeting with French President Nicolas Sarkozy in Berlin on Monday evening (14 June), during which French plans for a eurozone "economic government" appear to have been dropped, the German leader refused to comment on whether a Spanish bail-out application was imminent, however.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"If there should be problems, and we shouldn't talk them up, the mechanism can be activated at any time," Ms Merkel said. "Spain and any other country knows that they can make use of this mechanism if necessary."

Several leading German newspapers have recently suggested that EU and member state officials are quietly preparing to release funds to Madrid from the euro area's €750 billion rescue mechanism that was agreed last month.

Commission chief Jose Manuel Barroso, together with a string of national politicians, strongly denied this was the case on Monday.

Spain's economy is currently suffering from a struggling banking sector, an imploded property market, a ballooning budget deficit (currently at around 11.2 percent of GDP) and 20 percent unemployment, rising to 40 percent among young people.

Unions have indicated they will hold a general strike in September as the Socialist government prepares to push ahead with a package of public spending cuts and labour market reforms, designed to contain the deficit and kickstart the economy. Several economists have pointed to Spain's rigid labour laws as dissuading companies from making investments.

The moves have seen an end to six years of union support for Spanish Prime Minister Jose Luis Rodriguez Zapatero, with syndicate leaders on Monday reiterating their concerns over planned changes that will make it easier to hire and fire workers.

The country's banks are also suffering from a severe credit squeeze, a point noted by Spanish treasury secretary Carlos Ocana. "Obviously we do need for the markets to loosen," Mr Ocana said on Monday, in one of the first government public recognitions of the problem.

Burdened with millions of euros worth of bad loans after the country's property bubble burst in 2008, Spanish banks have increasingly struggled to borrow on the inter-bank lending market, an important source of short-term liquidity.

As a result the European Central Bank has been forced to make record loans to the country's financial institutions, as other borrowing sources dry up.

Eurozone economic government

The meeting between Ms Merkel and Mr Sarkozy also saw the French leader drop recent requests for regular meetings of eurozone leaders and the creation of a new "secretariat" designed to underpin the initiative.

The change of heart amounts to something of a victory for Ms Merkel, who has previously indicated her preference for economic decision-taking by all 27 EU states instead of the 16 euro area countries alone.

Mr Sarkozy also said he now supports Germany's proposal for a suspension of voting rights of EU members which are in serious breach of the bloc's budgetary rules.

"Like Madame Merkel, I am convinced that the solution to Europe's problems does not lie in the creation of new institutions," he told the Berlin news conference, adding that eurozone leaders would still hold "operational, pragmatic, rapid meetings" if the need arose.

Poland recently indicated it was opposed to the idea of regular eurozone leaders' meetings, fearing that it could relegate non-eurozone states to a second league in a divided EU. Spain and Italy had supported the French proposal.

"France came up with the term 'economic government,' and I embraced it gladly," Ms Merkel told journalists. "But in order to say, yes please, with all 27, so that we have no split in the common market."

Investigation

Diesel cars still dirty, despite huge EU loans

The European Investment Bank lent billions to carmakers, in part to clean up diesel cars. But diesel cars are still dirty, prompting questions if the money was well spent.

EU redoubles attack on roaming charges

After an embarrassing U-turn last week, the EU commission has proposed to abolish roaming charges by June next year. Only "abusive" clients to pay.

Stakeholders' Highlights

  1. GoogleDid You Know Europe's Largest Dinosaur Gallery Is in Brussels? Check It Out Now
  2. IPHRHuman Rights in Uzbekistan After Karimov - Joint Statement
  3. CISPECloud Infrastructure Providers Unveil Data Protection Code of Conduct
  4. EFAMessages of Hope From the Basque Country and Galicia
  5. Access NowDigital Rights Heroes and Villains. See Who Protects Your Rights, Who Wants to Take Them Away
  6. Martens CentreQuo Vadis Georgia? What to Expect From the Parliamentary Elections. Debate on 29 September
  7. EJCAppalled by Recommendation to Remove Hamas From EU Terrorism Watch List
  8. GoogleBringing Education to Refugees in Lebanon With the Clooney Foundation for Justice
  9. HuaweiAn Industry-leading ICT Solution Provider and Building a Better World
  10. World VisionUN Refugees Meeting a Wasted Opportunity to Improve the Lives of Millions of Children
  11. Belgrade Security ForumCan Democracy Survive Global Disorder?
  12. GoogleTrimming the Waste-Line: Weaving Circular Economy Principles Into Our Operations