Merkel Ally Fuchs Says Spain, Italy Are Doing What’s Needed
Spain (GSPG10YR) and Italy are doing enough to curb deficits and investors are unreasonable if they expect European governments to put up yet more money to combat the debt crisis, according to a senior lawmaker from Chancellor Angela Merkel’s party.
The strengthened financial backstop agreed by euro-area finance ministers in March is “big enough by far for the time being,” Michael Fuchs, an economic-affairs spokesman for Merkel’s Christian Democratic Union, said by phone today.
“I’m quite sure that both Italy and Spain are doing their homework,” he said. “Why should we worry about Spain now? I don’t think there’s anything that’s going to be a difficulty at the moment.”
The comments by Fuchs, a member of the CDU executive board, reflect German reluctance to consider further rescue commitments by the biggest single country contributor to bailouts for Greece, Ireland and Portugal. Germany’s parliament wouldn’t back raising the firewall beyond what was agreed in March, he said.
The yield on Spain’s 10-year benchmark bond surged more than 23 basis points to 5.99 percent today as the government declined to rule out a rescue for Europe’s fourth-largest economy. Prime Minister Mariano Rajoy announced an extra 10 billion euros ($13 billion) of budget cuts in education and health yesterday as he seeks to persuade financial markets he can control Spain’s debt.
Spain and Italy “still need an instrument in place to help them anytime,” Fuchs said. “But this instrument is now really big enough. It’s a little bit ridiculous that whenever we have a new instrument, somebody comes and says we have to raise the amount of money. I don’t think it’s really reasonable.”
Finance ministers from the 17-member monetary union decided on March 30 to place 500 billion euros in fresh money alongside 300 billion euros already committed, creating an 800-billion euro defense against the debt crisis now in its third year.
European policy makers are counting on the strengthened backstop to help sway the Group of 20 economies to increase the International Monetary Fund’s anti-crisis funding at an April 19-20 meeting.
“They need to come up with something,” Fuchs said. “We have done our homework in Germany, so now it’s up to them.”
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