Spain seeks to reassure EU leaders
Zapatero to tell EU partners that he is doing enough to ward off a crisis.
José Luis Rodríguez Zapatero, Spain’s prime minister, will today (17 June) update other EU leaders on his government’s efforts to restore the confidence of financial markets in Spain’s economy. He wants to convince EU partners that his government is doing enough to consolidate its public finances and ward off a crisis of confidence in Spain’s ability to finance its debts.
The amount of interest charged by investors on Spain’s sovereign debt yesterday reached a record high because of concerns that problems in the country’s savings bank sector were threatening the wider economy.
Spanish and German newspapers have suggested that Spain would ask for financial assistance from other eurozone countries at today’s summit. But Spanish officials said this morning that “Spain was not in danger” and was not planning to ask for assistance today.
Spanish financial daily El Economista reported yesterday that Spain was seeking an emergency credit-line of up to €250 billion from the EU, the International Monetary Fund (IMF) and the US Treasury. The story was denied by the Spanish government, the European Commission and the IMF.
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Media reports said that Spain would ask for support from two EU funds for eurozone governments in financial difficulty: a €60bn ‘European financial stabilisation mechanism’, which is reliant on guarantees from the EU budget; and a €440bn ‘European financial stability facility’, which is backed by the governments of the 16 eurozone countries as well as by Sweden and Poland. Governments approved the setting up of both funds last month, as part of their response to fears of a eurozone sovereign debt crisis.
Spain yesterday announced sweeping reforms to its labour laws that it hopes will stimulate growth. The reforms will make it easier for employers to reduce the hours that staff work during downturns. It follows an austerity package agreed by the Spanish government on 27 May that aims to cut public spending by €15bn this year. Spain is aiming to cut its deficit to 6% of gross domestic product (GDP) by 2011 from 11.2% in 2009.
Olli Rehn, the European commissioner for economic and monetary affairs, this week urged Spain to take further measures to repair its public finances. He said that, while the country had taken strong action in its 2010 budget, it needed to specify “concrete measures” it would take in 2011. He said these measures should be equivalent to 1.75% of its GDP.