Thursday

2nd Feb 2023

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"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."

Polish backpedal on windfarms put EU funds at risk

Draft legislation in Poland aimed at relaxing some of Europe's strictest laws surrounding onshore wind-turbines has been derailed by a surprise last minute amendment, which could put Poland back on a collision course with the EU.

Opinion

More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Latest News

  1. MEPs launch anonymous drop-box for shady lobbying secrets
  2. Hawkish ECB rate-rise 'puts energy transition at risk'
  3. MEPs push for greater powers for workers' councils
  4. How Pavel won big as new Czech president — and why it matters
  5. French official to take on Islamophobia in EU
  6. EU green industry plan could spark 'dangerous subsidy race'
  7. Wolves should be defended, EU ministers urge
  8. EU Commission wants drones for Bulgaria on Turkey border

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us