Eurozone finance ministers yesterday pressed Spain to clarify whether it would seek financial support after the announcement of the European Central Bank’s (ECB) new bond-buying program brought Madrid’s borrowing costs sharply lower.
Spanish Finance Minister Luis de Guindos deflected questions about a possible aid application on arriving for talks in Cyprus, saying they would discuss in general terms the conditions for ECB intervention in the markets.
“I’d like them to set out their position because it hasn’t been clear over the summer what their position is,” Irish Finance Minister Michael Noonan told reporters, reflecting concern among several eurozone countries that uncertainty over Spain is holding back a recovery from the bloc’s debt crisis.
The ECB has made it clear that a Spanish request for help from the eurozone’s bailout fund, and the negotiation of strict policy conditions and monitoring, is essential to trigger its bond-buying intervention in the secondary market.
Madrid is resisting any austerity conditions that go beyond European Commission recommendations it is already implementing, while north European creditors led by Germany are adamant that any aid would come with tough conditions.
The ECB’s announcement last week that it could buy unlimited amounts of Spanish bonds, should it apply for help from the eurozone bailout fund, brought Spanish 10-year bond yields down from 7.64 percent on July 24 to 5.62 percent on Thursday.
ECB President Mario Draghi said in a German newspaper interview that the central bank’s policy decision in itself was having beneficial effects.
“There have already been positive results,” Sueddeutsche Zeitung quoted him as saying yesterday. “The announcement of the facility has contributed to raising confidence in the euro area, and in the euro across the world.
“Fund managers are bringing their money back to Europe. This is good for the euro area economy,” Draghi said.
German Finance Minister Wolfgang Schaeuble launched a counterattack against critics of the bond-buying decision, including the country’s influential central bank, saying German worries of unlimited exposure to eurozone bailouts or the ECB printing money to finance debt-laden governments are unfounded.
“The ECB will not make any decisions that lead to the indirect financing of states. That would violate their mandate and they will not do it,” he said in a radio interview broadcast yesterday. “I have confidence in the ECB.”