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Germany urges Spain to ‘ask for financial help’

The head of Germany's central bank, Jens Weidmann, is pressing Spain to seek a bailout for troubled banks from the eurozone's current rescue fund, the European Financial Stability Facility (EFSF).

Germany urges Spain to 'ask for financial help'
Photo: DPA

“If Spain feels overwhelmed by its financial needs, it should use the instruments which have been created for that,” Weidmann said in an interview to appear Sunday in the weekly Welt am Sonntag.

“The motto must not be: Above all no rescue funds. Hoping for central bank aid to avoid fulfilling one’s responsibilities is a bad move,” the Bundesbank chief was quoted as saying in a pre-release of the interview.

In Madrid, a Spanish finance ministry spokeswoman said earlier in the day that Madrid had not changed its position and was not seeking aid for its banking sector.

 

“There has been no change,” the spokeswoman replied when asked if the government had changed its position in the face of intense pressure to seek tens of billions of euros in new capital so banks can resist severe financial shocks.

She spoke ahead of a scheduled emergency conference call by eurozone finance ministers to discuss how to help Spanish banks.

The ministers were expected “to agree a declaration on Spain’s intention to request aid and the Eurogroup’s commitment to granting it,” a European government official said.

Earlier, another official who also asked not to be identified said the 17-member eurozone expected the Spanish aid request “any time now.”

If Madrid does ask for help, it would mean the eurozone sovereign debt crisis has defied desperate attempts to contain the crisis to Greece, Ireland and Portugal.

It would also thrust the eurozone into uncharted waters – Spain’s economy is more than twice the size of those three countries combined.

AFP/jcw

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COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

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