Thursday

1st Dec 2022

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."

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

Investigation

Asbestos — two to three times more deadly than known

Where once working men in heavy industry were diagnosed with cancers related to a more direct exposure to asbestos, now women in professions such as teaching, nursing and other occupations are being diagnosed, as well as young people.

News in Brief

  1. 'Pro-Kremlin group' in EU Parliament cyberattack
  2. Ukraine will decide on any peace talks, Borrell says
  3. Germany blocks sale of chip factory to Chinese subsidiary
  4. Strikes and protests over cost-of-living grip Greece, Belgium
  5. Liberal MEPs want Musk quizzed in parliament
  6. Bulgarian policeman shot dead at Turkish border
  7. 89 people allowed to disembark in Italy, aid group says
  8. UN chief tells world: Cooperate on climate or perish

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. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU Commission proposes suspending billions to Hungary
  2. EU: Russian assets to be returned in case of peace treaty
  3. Frontex leadership candidates grilled by MEPs
  4. Portugal was poised to scrap 'Golden Visas' - why didn't it?
  5. Why the EU asbestos directive revision ... needs revising
  6. Nato renews membership vow to Ukraine
  7. Catalan spyware victims demand justice
  8. Is the overwhelming critique of Qatar hypocritical?

Stakeholders' Highlights

  1. European Committee of the RegionsRe-Watch EURegions Week 2022
  2. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  3. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  4. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  5. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  6. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022

Join EUobserver

Support quality EU news

Join us