Merkel Ally Says Spain Can’t Escape Conditions in Aid Bids

Spanish Prime Minister Mariano Rajoy can’t expect to escape conditions if he seeks more aid from Europe’s bailout funds, said a senior lawmaker from Chancellor Angela Merkel’s Christian Democratic Union party.

While Spain’s government hasn’t said whether it needs more help from the permanent euro rescue fund, the European Stability Mechanism, it must hold to terms to gain aid if required, Michael Meister, CDU whip and finance spokesman, said by phone. The constitutional court upheld the role of Germany’s parliament today in approving ESM aid and the “certainty” of terms attached to it, he said.

“It’s crystal clear that if Spain asks for further help it cannot escape conditionality entirely,” he said. “Conditionality will apply in either case,” a full aid program or limited precautionary assistance, and “the same basic approval procedure will apply,” he said. “Any application -- and the court made this very clear today -- must be approved by the German Bundestag,” parliament’s lower house.

Today’s ruling of the constitutional court in Karlsruhe opens the way to German ratification of the delayed ESM while upholding the role of lower-house lawmakers to approve aid petitions. Rajoy, who has already secured as much as 100 billion euros ($129 billion) in aid for Spain’s banks, has yet to decide whether he will seek a broader financial lifeline from the rescue fund.

Schaeuble Briefing

German Finance Minister Wolfgang Schaeuble told CDU lawmakers on Sept. 10 that Spain has made good progress in implementing fiscal and economic reforms and doesn’t need to enter a full program of ESM aid to add to the bailout of its banks agreed on June 29, two party official said on condition of anonymity because the meeting was held in private.

Germany has “no preference” should Spain require a full program or precautionary assistance in the form of loans, Meister said.

European Central Bank President Mario Draghi announced plans last week to buy government bonds to help lower borrowing costs for countries such as Spain and Italy as long as governments first apply to the rescue fund for aid and submit to “conditionality.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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