Lending money to euro-region countries such as Spain and Italy that are struggling to cut their budget deficits won’t solve their fiscal difficulties or save the euro, Dutch Finance Minister Jan Kees de Jager said.
“You cannot solve this with loans,” he told reporters before a meeting of euro-area finance ministers in Brussels today. “But you have to fundamentally solve the problems of these countries. Spain’s government has said ‘we will do this.’ The commitment is there, though it takes time.”
European Union leaders agreed at a June summit to ease the way to direct financing for troubled banks, start work on Europe-wide bank supervision and ease access to the region’s bailout mechanisms. Finance ministers, who are meeting today and again on July 20, have been asked to hammer out the details amid a worsening debt crisis.
Spanish Prime Minister Mariano Rajoy pleaded with other euro-area countries on July 7 to make good on the June summit pledges, which include the option of government bond purchases by Europe’s rescue funds for countries meeting the euro’s existing debt and deficit rules.
Spain, which has the region’s third-biggest budget shortfall, last month became the fourth euro-area country to seek a bailout to prop up banks burdened with bad loans. With Spain’s 10-year bond yields climbing back above 7 percent today, investors remain skeptical, de Jager said.
“They have to convince markets that what they do is good and is good enough,” he said.