Senior ministers from Germany and Spain together
criticized the soaring yields on Spanish government bonds, saying
Tuesday that the interest rates demanded by financial markets did not
match Spain's economic fundamentals.
The joint statement was issued after talks in Berlin between
Economy Minister Luis de Guindos and German Finance Minister Wolfgang
Schaeuble. Yields on 10-year Spanish bonds have spiked this week
higher than 7.5 per cent as Spain's recession deepened.
The two said that Spain had undertaken important steps to right
its economy.
"Comprehensive reforms have been carried out, especially in budget
policy, the labour market and in restructuring the banking sector,"
the ministers said.
Those actions would lead to a sustainable consolidation of the
budgets of regional governments and Spain's central government.
They said current interest rates demanded for Spanish government
bonds were not appropriate to the fundamental data for Spain, its
growth potential or its ability to handle public debt.
"We are in agreement that the programme to strengthen the Spanish
banking sector is an important building block to overcome the crisis
of confidence in Spain and in the eurozone as a whole," de Guindos
and Schaeuble said.
They said the programme would end the vicious circle that connects
the banking crisis to the sovereign debt crisis, and that resolute
and complete implementation would be decisive in restoring
confidence.
