MADRID — Spain’s treasury minister said Tuesday that his country was being choked off from access to credit, sounding the country’s clearest call for help yet in the 21
2-year-old crisis that could leave one of Europe’s largest economies on life support.
Only three small euro-zone countries have resorted to international bailouts and the hard conditions that come with them, and Spain, the currency union’s fourth-largest economy, is desperate to avoid becoming by far the largest casualty.
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Treasury Minister Cristobal Montoro called Tuesday for Europe to give his country’s faltering banks direct aid in a bid to prevent Spain’s financial system and the government’s finances from dragging each other down. Germany, which as Europe’s largest economy has de facto veto power over any new aid programs, opposes the idea even though it is floating major long-term plans to shore up Europe’s finances.
Panicked investors have pushed borrowing rates for Spain so high that “the market door is not open for Spain,” Montoro told Madrid’s Onda Cero radio Tuesday. “The risk premium says that as a state we have a problem in accessing markets.” Spain hopes to raise as much as $2.5 billion in a bond auction Thursday, suggesting that policymakers here think that the door is not fully shut.
Spain’s struggles could pose the largest challenge so far in a long-simmering crisis that has turned a once-booming confederation of European countries into a continent racked by recession, unemployment and financial uncertainty. Only Germany has pockets deep enough to push down countries’ borrowing costs, guarantee fearful depositors’ investments and kick-start listless economies, and German leaders have in recent days shown openness to a far-reaching bargain that would harness the might of its taxpayers to bolster its struggling neighbors.
The catch? The changes that Germany is considering would come only on a time scale of years, far too slow to help Spain with its pressing problems in the coming days and weeks. Estimates on how much the Spanish banking system would need range from $50 billion to $125 billion — Montoro said it was “not astronomical” — and a bailout of the entire country could cost far more.
But Germany has steadfastly opposed any attempt to channel the bailout funds straight to Spanish banks, saying that if Spain needs the funds, it should follow in the footsteps of the other troubled euro-zone economies that have needed to request national-level bailouts with all the strings attached.
“Our position is that everything is more or less in place in terms of immediate crisis response,” said an official at the German Finance Ministry, speaking under conventional ground rules of anonymity.
Still, broad measures — including giving bank deposits European-wide support, creating a strong regional banking regulator that could override national governments and pooling a portion of the debt of the 17 countries that use the euro — are being discussed in Europe to an extent unimaginable just months ago. But any new plans would probably come with a steep price: Countries would have to hand unprecedented control over sovereign decisions about borrowing and spending to the European Union.