Spain lashes back at Italy, says the EU should be supportive

Reuters/Madrid

Spanish Prime Minister Mariano Rajoy rounded on his Italian counterpart Mario Monti yesterday by calling on European leaders to be more careful when they talk about Spain as it struggles to show markets it can control its finances.Several Spanish government sources also told Reuters that Madrid expected more backing over its ambitious reform agenda from Europe, especially the European Central Bank (ECB).Reports in Italian and Spanish newspapers – quoting Monti as saying Spain’s financial problems were the main reason for renewed tensions on debt markets in Europe – irritated Spain.Monti’s office, however, denied the comments.“I wish to say the following with regard to some statements which have been made in the EU, and more explicitly last night by some EU leaders,” Rajoy told parliamentarians from his governing People’s Party, falling short of mentioning Monti by name.“We hope that they assume their responsibilities and are more cautious in their statements. We don’t talk about other countries. We wish other EU and eurozone countries the best. What is good for Spain is good for the eurozone.”Italian newspaper Corriere della Sera said yesterday that Monti told aides during a visit to the Middle East that Italy was “paying on the rebound for the Spanish crisis”.Monti already caused unease in Madrid three weeks ago after publicly expressing concern about Spain’s public finances.Italy’s one-year borrowing costs doubled at a sale of short-term bills yesterday, mirroring fresh doubts about weaker eurozone countries and highlighting market nerves ahead of a more challenging auction of three-year bonds today.The Spanish government sources said Spain needed more support from its partners for what it had already done.“Spain has done its part of the job. Now Europe has to do its part of the job as well,” a source in Rajoy’s office said.The source was referring to the possibility of building stronger EU institutions and firewalls to protect Spain from markets turbulences.Madrid has repeatedly ruled out applying for any kind of financial aid from Europe.Another source close to the Spanish government also said the centre-right government needed more support from its European partners.The source said the ECB should be allowed to act as a lender of last resort for the eurozone’s 17 members, banned by EU treaties.ECB Executive Board member Benoit Coeure said yesterday that what was happening in Spain, where sovereign debt yields have spiked back to 6% amid concerns over the country’s ability to cut its deficit, did not reflect the fundamentals.He added that the Frankfurt-based institution, which has injected about 1tn euros ($1.31tn) into the financial system since December, still had its bond-buying programme as an option to intervene in support of Spain.In a sign of support from EU partners, Germany and France, the two heavyweights of the eurozone, praised Madrid for its “efforts” to reform the economy and regretted they were not recognised by investors.Since December, Madrid has announced key reforms aiming at cleaning up the balance sheet of its banks, reducing an unemployment rate currently close to 23% and improving controls over the spending of its indebted regions.It also announced late March cuts of 27bn euros to its central government budget and said on Monday that it would save an extra 10bn euros a year by reforming its healthcare and education systems.The European Commission welcomed these new austerity measures and said it had a positive view on the country’s 2012 budget draft.However, it said it now needed more information on the autonomous regions’ budget plans before providing a full assessment and make recommendations to the Spanish authorities.“We expect this information by the end of this month, as well as the national reform programme, not only from Spain but from the 26 other members of the Union,” a Commission’s spokesman said yesterday.The Spanish government source said the details would be sent to the Commission by the end of the week, probably after Rajoy meets key region leaders of his party on Saturday.