German Chancellor Angela Merkel has angrily dismissed pleas from Italy and Spain for financial aid as a rift develops that could shatter attempts to find a fix for the crisis at a meeting of EU leaders today.
Ms. Merkel was in Paris last night for emergency talks with French president Francios Hollande but before she left Germany she told her MP’s at the Bundestag, the lower house of parliament in Berlin, that instead of continuing to provide cash bailouts for the Eurozone more effort was needed to step up debt reduction and economic reforms.
“I fear that at the summit we will talk too much about all these ideas for joint liability and too little about improved controls and structural measures,” she said.
Spanish Prime Minister Mariano Rajoy said he would ask other EU leaders to allow euro bailout funds or the European Central Bank to stabilise financial markets by assisting in the reduction of borrowing costs, which are currently running at nearly 7% for Spain.
“We can’t keep funding ourselves for a long time at the prices we’re currently funding ourselves,” Rajoy said. “There are institutions and also financial entities that cannot access the markets. It is happening in Spain, it is happening in Italy and it is happening in other countries.”
Spain’s central bank said the recession is likely to deepen in the second quarter of this year while official figures show the government’s deficit had reached 3.41% of GDP in the first five months of the year, already approaching the 3.5 % target for the year.