Germany backs Spain’s austerity measures

Wolfgang Schäuble - supports Spain's efforts
Wolfgang Schäuble – supports Spain’s efforts

Germany has lent it’s support to Spain’s reforms and austerity measures saying it is heading in the right direction, despite record borrowing costs, high unemployment, protests and spending cuts.

Following a meeting in Berlin the German finance minister, Wolfgang Schäuble, and the Spanish economy minister, Luis de Guindos, released a joint statement condemning the high interest rates being demanded for the sale of Spanish bonds as they failed to reflect “the fundamentals of the Spanish economy, its growth potential and the sustainability of its public debt”.

Despite this no new measures have been announced to stem the rise in borrowing costs or to prevent possible contagion to other eurozone members.

Both ministers commented that the €100 billion package intended to recapitalise Spain’s struggling banks was an important part of overcoming the confidence crisis in Spain, and across the eurozone. They said “decisive, swift and full implementation” of the plan was essential to restore confidence in Spain’s banking sector.

The ministers had praise for the incorporation of a “balanced budget rule” in the Spanish constitution, saying that it would contribute to “sustainable fiscal consolidation of the regions”.

While the meeting was taking place Spain was paying the second highest interest rate on short-term debt since the birth of the euro.

Also on Tuesday, ratings and research agency Moody’s changed the outlook on EU’s temporary bailout fund, the European Financial Stability Facility, to negative.