EU Breather Eases Spain's Tensions; Greece Under Pressure Again

EU Breather Eases Spain's Tensions; Greece Under Pressure Again


The European Union finance ministers decided to give Spain 30 billion euros to shore up its banks and one extra year to correct its deficit, but Greece, with the EU freezing loan payments temporarily, is hunting for 3 billion euros in urgent savings to cover its short-term funding requirements.
Speaking to reporters in Brussels after a two-day EU finance ministers meeting, Greece's Finance Minister Yiannis Stournaras said the government would have to find another 3 billion euros in savings "urgently" in the coming weeks.
The EU has kept the payment of the loan instalment on hold due to long political instability after the elections and has indicated that Greece would not get the money until the new government resumes implementation of the planned reforms. Meanwhile, the new government has signaled that Greece too wants more lenient terms for the bailout it availed.
Stournaras, however, does not expect the loan payment to be made before September and the country faces an August 20 deadline for the repayment of 3.1 billion euro-bond held by the European Central Bank.
On Spain, the EU ministers said a further deepening of the economic crisis and implementation risks at regional level could imply an even larger deviation from the budget deficit target. The debt-to-GDP ratio is also expected to be higher than thought due to high interest payments.
"Considering all these factors, and given in particular the deterioration in the fiscal outlook since the Council's 2009 recommendation, the Council considers that an additional year for correction of the deficit is warranted," the ministers said in a statement.
The European Union Council on Tuesday gave the go-ahead to the pilot phase for an initiative aimed at mobilising, via the use of project bonds, up to EUR 4.5 billion in private sector funding for key infrastructure projects.
Meanwhile, German Constitutional Court has started hearing into the compatibility of EU bailout scheme and budget rules with German law. German Finance Minister Wolfgang Schaeuble reportedly told the Court that a delay in approving the European Stability Mechanism, the region's permanent bailout fund, could lead to more uncertainty.

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