Germany rules out that the rescue fund buy debt to calm the markets

Germany rules out that the rescue fund buy debt to calm the markets

  • Wolfgang Schäuble denounces “speculation” the information that the ECB is moving in this line to reduce interest on the bonds of Spain and Italy.
  • It also rejects the idea that the European Financial Stability Fund can become the safe conduct that evades Germany’s refusal.
  • “The high levels that Spanish interests have reached are painful, but it is not the end of the world to pay a higher percentage in debt auctions,” he says.
Guindos y Schäuble

Luis de Guindos (left), and Wolfgang Schäuble, during a press conference at the Adenauer economic forum in Santiago de Compostela. EFE

German Finance Minister Wolfgang Schäuble dismisses the European Financial Stability Fund (EFSF) as buying Spanish and Italian debt to ease market pressure. “Speculation” of the information indicating that the European Central Bank (ECB) is moving in this line to lower interest on the bonds of Spain and Italy.

Spain’s short-term financing needs are not so high In an interview with the German daily Die Welt am Sonntag published this Sunday, Schäuble dismisses the ECB’s intervention by buying debt and also rejects the hypothesis that The EFSF, the temporary rescue mechanism, can be erected as a safe conduct that evades the refusal of Germany. “No, these speculations are not true, ” replies Schäuble.

“Spain’s short-term financing needs are not that high,” Schäuble says. “The high levels that have reached the interests are painful and create a huge uncertainty, but it is not the end of the world to pay a higher percentage in debt auctions,” argues the German Finance Minister.

 

However, Schäuble says he is aware of the untenable situation implied by high interest rates on Spanish debt. As a security cushion, the head of German Finance points to the additional 30,000 million euros approved in the Memorandum of Understanding, the document that certifies the financial aid granted to Spain, for “a potential immediate financial assistance”.

Markets and rating agencies

On the other hand, that Germany barely pays interest on its debt only denotes a “deep insecurity” in investors , according to Schäuble. Although it relieves the debt burden, this is a sign that “the markets are not in order,” he points out.

The markets do not take the rating agencies so seriously However, it does not expect that the interest that the investors pay for the German bonds will increase in the hand of the revision of the rating of the German debt to “negative outlook” on the part of of the Moody’s rating agency. ” There will not be any interest increases , so I’ll go on a quiet holiday, since the markets do not take the rating agencies so seriously,” Schäuble praises.

In this sense, it also shows its skepticism about how the markets have received the latest reform packages approved by the Government of Mariano Rajoy. The Spanish Executive, clarifies Schäuble, “has taken all the necessary decisions” and is having “a good effect”. “If the markets do not trust them, the time will come” in which they do, the German minister adds, “Spain needs time.”

If the markets do not trust Rajoy’s reforms, the time will come. Ever since the president of the ECB, Mario Draghi, assured last Thursday that “he will do everything necessary to preserve the euro”, the information about a change in the policy of the eurobank have not stopped appearing. Initially, reluctant to buy debt from countries in difficulties, the ECB could be evaluating this option in order to quell the market battles against Italy and Spain. Not in vain, the Bundesbank, the central bank of Germany, opposes this measure.

In addition, from the words of Draghi, the Spanish risk premium began its decline from 600 basis points to 534 and the stock market began its positive climb, chaining three days of earnings and recovering 6,000 points.