German Chancellor Angela Merkel has said eurozone states including Spain are free to call on the bloc’s rescue fund whenever needed.
Speaking after a meeting with French President Nicolas Sarkozy in Berlin on Monday evening (14 June), during which French plans for a eurozone “economic government” appear to have been dropped, the German leader refused to comment on whether a Spanish bail-out application was imminent, however.
“If there should be problems, and we shouldn’t talk them up, the mechanism can be activated at any time,” Ms Merkel said. “Spain and any other country knows that they can make use of this mechanism if necessary.”
Several leading German newspapers have recently suggested that EU and member state officials are quietly preparing to release funds to Madrid from the euro area’s €750 billion rescue mechanism that was agreed last month.
Commission chief Jose Manuel Barroso, together with a string of national politicians, strongly denied this was the case on Monday.
Spain’s economy is currently suffering from a struggling banking sector, an imploded property market, a ballooning budget deficit (currently at around 11.2 percent of GDP) and 20 percent unemployment, rising to 40 percent among young people.
Unions have indicated they will hold a general strike in September as the Socialist government prepares to push ahead with a package of public spending cuts and labour market reforms, designed to contain the deficit and kickstart the economy. Several economists have pointed to Spain’s rigid labour laws as dissuading companies from making investments.
