EU REACTION:AS EUROPEAN finance and economy ministers began talks in Brussels over the future of the euro, Spain's minister for finance Elena Salgado denied reports Europe was putting pressure on Madrid to take additional steps to protect the Spanish economy.
She was unable attend the Euro Group meeting in Brussels yesterday because of a previous appointment but is expected to be at the Ecofin reunion later today.
Ms Salgado, who is also second vice-president of the government, insisted that Spain “is up to date” in its programme of economic reform and doubted further steps would be necessary adding: “the situation in Spain is very different from Ireland or Portugal as the government took the necessary measures last May, which are showing results, and the 2011 budget is expected to go through the parliament shortly,” she said.
With respect to Ireland she said that the euro zone group should offer “whatever assistance they require to solve their problems”.
Pedro Passos Coelho, leader of the Portuguese Social Democratic Party (SDP), refused to comment on the possibility that Portugal could be “dragged down” if Ireland was forced to resort to a European bailout.
“It would not be wise or reasonable to anticipate events that could affect developments,” he said. But he stressed that the situation in Ireland was very different from that in Portugal.
German finance minister Wolfgang Schäuble warned last night that, when it comes to European Union bailouts, “solidarity is not a one-way street”.
Mr Schäuble’s remark, directed at Greece, came as Berlin’s patience with Ireland over its banking crisis began to strain. After challenging Greek criticism of Berlin’s crisis management, Mr Schäuble ruled out any solution for Ireland’s financial difficulties “that involves pushing people around”.
“We don’t do that in Europe,” he said, adding that Dublin “knows much better than we do what is to be done”.
One German official’s terse assessment of the situation last night was: “I’m sure the Irish Government knows what it wants to tell us.”
Breaking rank, one senior official in Chancellor Merkel’s ruling Christian Democratic Union (CDU) party, called for Ireland to make concessions on corporate tax in return for assistance.
German investors hold a total of €138 billion worth of bonds, with nearly all large banks involved. The largest single bond-holder is property lender Hypo Real Estate, which was nearly bankrupted two years ago by the huge debts and liquidity problems of its Dublin-based subsidiary, Depfa
Some €10 billion of Irish bonds are owned by HRE, which in turn is owned by the German state after it was nationalised a year ago.
Add in the bank’s holdings in other endangered euro zone states, Portugal, Greece and Spain, and HRE’s total exposure is €35.5 billion. Total German investment in sovereign bonds from the so-called PIIGS states is €75 billion.