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.
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