US President Barack Obama and British Prime Minister David Cameron called on Europe to come up with an “immediate plan” to resolve the eurozone crisis, but Germany turned down Wednesday a plea for swift help from Spain.
The European Central Bank also refused to toss recession-hit eurozone economies an easy-money boost, keeping interest rates steady at 1.0 percent. European leaders are under intense pressure to take bold action to try to resolve the two year old crisis at a June 28-29 summit. Obama and Cameron kept up that pressure, agreeing in a late-night telephone call “on the need for an immediate plan to tackle the crisis and to restore market confidence, as well as a longer-term strategy to secure a strong single currency,” according to a Downing Street spokeswoman.
Teetering Spanish banks are now the urgent focus with Madrid asking for deeper eurozone integration so European funds can be directly pumped into lenders so it can avoid the Irish trap where saving the banks dragged the country into a bailout. Spanish Finance Minister Luis De Guindos signalled Madrid will have to move quick, making a decision within the next two weeks on how to help its lenders who are struggling to raise 80 billion euros ($100 billion) in capital to shore up their books. Europe “must help nations in difficulty,” Spanish Prime Minister Mariano Rajoy told lawmakers on Tuesday as he called for a laundry list of EU reforms viewed with suspicion by Germany including deposit guarantees, a banking union, and eurobonds. The proposal gaining the most traction outside Germany is to integrate the eurozone’s national banking systems, which would sever the link between banks and sovereign finances.
But powerhouse Germany resisted the pleas, saying whatever help the EU can provide to an increasingly desperate looking Madrid should come from tools, and according to rules, that exist already. Government spokesman Steffan Sibert said the reforms asked for by Rajoy required long-term changes beforehand, while reiterating that only governments can apply for cash from the European bailout funds. “These instruments must be applied for by governments … whether a government wishes to apply is purely a matter for the government,” Seibert said. A leading member of German Chancellor Angela Merkel’s coalition sarcastically called the banking union idea “a new, admittedly creative, way to tap German solvency.” “Every eurozone country has to take responsibility for its own banks,” said Christian Lindner, one of the Free Democrats party’s rising stars. But Spain has so far refused to seek financial assistance from the European Union that would come to the government with tough strings and a politically humiliating austerity programme attached to it.
But some kind of rescue for Spain was beginning to emerge, and French Finance Minister Pierre Moscovici said EU partners are ready to “mobilise very rapidly” to come to Spain’s financial assistance.
