Europe throws Spain double lifeline as borrowing costs soar
THE European Commission threw Spain two lifelines yesterday, offering more time to reduce its budget deficit and direct aid from a eurozone rescue fund to recapitalise distressed banks.
The moves came as money flooded into safe haven countries like the US and Germany as investors fear another global financial storm is brewing.
Spanish, Italian and Irish government borrowing costs lurched higher and the Madrid stock market hit a nine-year low. EU economic commissioner Olli Rehn said Brussels was ready to give Spain an extra year until 2014 to bring its deficit down to the EU limit of 3pc of GDP if Madrid presents a solid two-year budget plan for 2013-14, something it has committed to do.
The concession was on condition that Spain reins in overspending by its autonomous regions, makes further financial sector reforms and recapitalises its troubled banks. While the commission is responsible for proposing laws, it is member states that decide whether to adopt them.
EU paymaster Germany has so far firmly opposed any collective European banking resolution and guarantee system or any use of bailout funds without signing up to an austerity programme.
Pictured above are Civil Guards firing plastic bullets during a protest by coal miners in northern Spain.