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German minister rejects talk of Spain aid request

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July 28, 2012, 2:03 p.m. | World — by Associated Press

German Finance Minister Wolfgang Schaeuble, right, gestures as he speaks to German Chancellor Angela Merkel, left, during a special session of the German Parliament Bundestag in Berlin, Germany.
© AP

Associated Press

Associated Press

BERLIN — Germany's finance minister is rejecting talk of a possible application from Spain for the eurozone's bailout fund to buy the struggling country's bonds, a newspaper reported Saturday.

This week, European Central Bank head Mario Draghi promised to do "whatever it takes" to preserve the euro. The German and French leaders then said that they were "determined to do everything to protect the eurozone."

Neither mentioned any specific action. But those comments raised expectations that the ECB — or the eurozone's temporary rescue fund, the European Financial Stability Facility — might step in to buy Spanish government bonds and lower the country's borrowing costs, which have been at worryingly high levels in recent weeks.

Still, German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper that Spain's short-term financing needs are "not so big."

Asked about talk that Spain could soon make an application for the eurozone rescue fund to buy bonds, he replied: "There is nothing to this speculation."

"The high interest rates are painful and they create a lot of concern — but it's not the end of the world if one has to pay a few percent more at a few bond auctions," Schaeuble was quoted as saying.

He added that an aid package worth up to €100 billion ($123 billion) to help Spain's banks, which are laden with soured investments following a property sector collapse, is "sufficiently large." Spain's budget-cutting and economic reform efforts will have positive effects, "on the financial markets too," he insisted.

Spanish officials have been adamant that the country, the eurozone's fourth-largest economy, will not seek a full-scale bailout along the lines of those given to Portugal and Ireland as it battles with a persistent recession.

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