Germany thwarts Spain's timeline

Sept. 17, 2012 at 12:50 PM
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NICOSIA, Cyprus, Sept. 17 (UPI) -- Finance ministers from Spain and Germany differed over the weekend on a timetable for new eurozone policies that would allow aid to go directly to banks.

"We need to stick to the timetable. The objective for now has to be ambitious," said Spanish Finance Minister Luis de Guindos, referring to a proposal to put European banking regulation under one roof, presumably the European Central Bank.

The New York Times reported Monday that French Finance Minister Pierre Moscovici backed up his Spanish counterpart, but German Finance Minister Wolfgang Schauble said the time line that suits Spain would "not be possible."

In the background, tens of thousands of demonstrators marched in Spain and Portugal over the weekend, protesting budget cuts that have been made necessary by looming government debt and the insistence of Germany and others that international loans be backed up with pledges from the struggling countries to get their financial houses in order.

With Greece's economy in a deep recession and their international loans adding to their debt burden, Spain is trying to maneuver policy to allow international aid to go directly to banks, so the government debt is not increased by the rescue effort.

The Times reported Monday that the latest proposal from European Commission President Jose Manual Barroso , which was given a mixed reaction last week, was to create a central banking authority.

Several nations do not want to give up control of their banks. Germany, on the other hand, does not want to give up control of loans given to private businesses in other countries, as opposed to loans given to governments.

Presently, there is already money on the table. European leaders have agreed to lend Spain $131 billion to help the government bail out its banks, which are struggling under the debt of bad loans that turned toxic with the economic downturn.

Spain does not want to apply for the money that is available, even though the European Central Bank recently announced it would buy short-term bonds from struggling governments so long as those governments first applied for international assistance -- a step Spanish Prime Minister Mariano Rajoy is currently unwilling to take.

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