Euro Zone Crisis
The euro zone crisis was triggered in 2009 when Greece's debts, left by its previous government, reached a record 300 billion euros, leaving the southern European economy with debt levels more than four times higher as a proportion of gross domestic product than the official euro zone cap of 60 per cent of GDP. Since the original problems were uncovered, Greece has been bailed out twice, and lenders have also had to rescue Ireland and Portugal. In the latter half of 2012. Cyprus also required a bailout.
Spanish PM insists Madrid has not yet decided on ECB bailout offer
Harold Heckle in Madrid
Spain’s prime minister said Monday he had yet to decide whether to accept a European Central Bank bailout offer, insisting what was more important was to continue reducing the deficit through austerity measures and tax hikes.
In his first television interview since he was elected to office in November, Mariano Rajoy said he was not yet ready to say if the ECB’s offer was “necessary or convenient.”
“We must see if it really is necessary and what the conditions are,” he said. He added that he needed to study the conditions attached and that “there are certain red lines” he was “not prepared to cross.” He didn’t elaborate on what those might be.
“I could not accept them telling us which reduction policies are needed and which are not,” he stipulated.
Rajoy said easing interest rates on bond markets had made it easier for the government to finance itself. He also said the government will introduce two new taxes in an October budget although he pledged income and sales tax would not be raised.
One tax relates to profits made through the sale of property that has increased in value, the other related to “green issues” which he did not specify.
He said it was likely Spain’s ailing banks would not need all of the 100 billion euro (US$125 billion) bank bailout fund approved by the 17 countries that use the European single currency.
He also said Spain would meet its deficit reduction targets and would be within the 4.5 per cent of Gross Domestic Product for 2013.
Rajoy acknowledged that central government spending was proving easier to bring under control than that by regional legislatures. He said regional governments had seen their income roughly halved since 2007 and since they were responsible for “important aspects” of expenditure such as healthcare and education, he would continue to support them should they run into financial difficulties.
Rajoy said he would not alter the current pension structure, adding that pensioners were the most vulnerable group during times of financial crisis.
The prime minister acknowledged that his party had broken some of its election pledges having to raise income and sales taxes, but said his mandate still had three years to run and there was still time to reverse those “unpleasant and unwanted” decisions once Spain was restored to a path of sustained growth.
The ruling Popular Party faces elections in Rajoy’s native northwestern Galicia and the troubled northern Basque region in October.
Some of Rajoy’s answers seemed to be conditioned by the elections, notably when he said he would not make any decision on possible bailout conditions “for at least a month.”