German finance chief warns Spain against seeking extra bailout funds

PUBLISHED : Saturday, 15 September, 2012, 12:00am
UPDATED : Saturday, 15 September, 2012, 4:03am

German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout, saying another request for outside aid risked a new round of financial market turmoil.

"I'm not in the camp that says 'take the money'," Schaeuble said, when asked about moves to press Prime Minister Mariano Rajoy's government to seek more aid.

Spain "would be daft" to ask for a bailout on top of the €100 billion (HK$1.01 trillion) for its banks if it did not need it, he said.

European finance ministers gathering for a two-day meeting beginning in Cyprus yesterday are at odds over Spain, as Rajoy stalls on whether to request more aid from euro-area rescue funds and win European Central Bank help to lower government borrowing costs.

France was pressing Spain to seek more help to contain the euro-zone crisis three years after it emerged in Greece, three people familiar with the negotiations said this week.

"Spain will have to make its own decision," French Finance Minister Pierre Moscovici said in Athens yesterday in response to a question on a possible Spanish bailout request.

"But all tools are available to it if it needs them."

To qualify for European central bank help, Spain would have to negotiate a credit line or full loan programme from the taxpayer-financed rescue fund, and the question of which option to take is set to dominate the meeting in Nicosia, Cyprus.

A fight is brewing over the conditions imposed - budget cuts and economic reforms - with Rajoy saying Spain has already done enough to deserve the help.

"I don't share the view of those who say Spain is so much a focus of speculation in the financial markets that we should advise the Spaniards to do anything different from what they're doing," Schaeuble said. "I'm one of those who say we should do everything possible to convince the markets that this speculation against Spain is without any basis in reality."

Spanish officials said this week their country might not need a second bailout because the ECB's September 6 announcement that it was prepared to buy government bonds had already cut borrowing costs.

"We are working with the governments and of course with the German government," with a common goal "to recover economic growth in Europe," Spanish Budget Minister Cristobal Montoro said, when asked about Germany's stance on a rescue. "Our desire and intention is to return again to being a reliable partner in Europe that doesn't ask for anything."