Spain’s rating downgrade at Standard & Poor’s doesn’t alter Germany’s stance that banks can’t have direct access to Europe’s financial backstops, a senior lawmaker from Chancellor Angela Merkel’s party said.
“The German position is absolutely strict,” Michael Meister, the deputy caucus chairman of Merkel’s Christian Democrats, said in a phone interview in Berlin today. “And since such aid programs require unanimity, there’s not going to be any change. All sorts of people can try to set things in motion, but Germany won’t vote for it.”
It’s “obvious” that there can’t be unconditional help from the European Stability Mechanism for Spanish banks, Meister said. The responsibility and liability for the ESM lies with its members, which are nation states, not banks, he said.
Spanish bond yields rose above 6 percent this month for the first time since November on concern that banking losses will swamp the government. S&P cut its rating on Spain by two levels to BBB+ yesterday, three steps from junk status, citing concern that the country will need to pour more money into its lenders.
There are no negotiations taking place to reopen the ESM treaty to give banks direct access and there’s no working group to prepare new instruments for the backstop, German Finance Ministry spokesman Johannes Blankenheim said today at a regular government press conference, responding to a newspaper article.
“Spain doesn’t only have a problem with its banks,” said Meister. “Spain has a problem with its banks, it has a problem with its budget and it has a problem with its economic situation, with its competitiveness” too. “Thinking that Spain will be on the safe side once the banking problem is solved is a bit ambitious.”
Spain’s unemployment rate rose to 24.4 percent in the first quarter, the highest in 18 years, the National Statistics Institute in Madrid said today. The euro area’s fourth-largest economy entered its second recession since 2009 amid the deepest austerity efforts in more than three decades.
Spain is sticking to its line that austerity should be the main driver of policy as it tries to quash concerns that it will be pushed to follow Ireland, Portugal and Greece into a bailout. European officials have not asked Spain to seek a bailout and the country doesn’t need it, Economy Minister Luis de Guindos said yesterday in an interview.
“I’m still confident that they can get by without external help, despite the rating agencies,” said Meister. “Rating agencies always catch up with the facts at some stage and Spain’s three problems have been known for a long time.”
There will be more European downgrades in coming months, Meister said.