German Chancellor Angela Merkel. (Reuters)
German Chancellor Angela Merkel said on Tuesday that the plan to help the Spanish banking sector “of course includes conditions,” although only in order to “guarantee that this sector is operational in the future.”
The conditions will only affect the restructuring of the banking sector, not the macroeconomic program, she stressed, adding that Spain must continue with “its tough reforms.”
The German chancellor spoke in public for the first time since the decision was announced on Saturday that the European Union will provide financial aid to Spain’s banks, at a conference of her Christian Democrats (CDU).
She said the decision taken by Madrid to request financial help from Brussels was “correct” in order to sanitize its banking sector and she expressed support for Prime Minister Mariano Rajoy’s reform program.
Since Rajoy came into power in December, his government has introduced an ambitious program, including a labor reform and two financial sector reforms, in order to tackle the economic crisis.
More control from Brussels
The head of the German government said that Spanish banks that will receive European aid must accept more rigorous supervision from Brussels. Former controls had not been enough, she said, adding that this inevitably leads to the cession of “national competences” to European levels.
Merkel explained that the consequences of a “real estate bubble for ten years” are impossible to solve by one country on its own. She argued that the European mechanisms have been put in place precisely to help solve this kind of problems.
The chancellor said Spain, in the same way as Greece, Ireland and Portugal, should “assume their responsibilities” and continue with the reforms.
“It would be very bad if in Europe, where some countries have started working in the right direction, this work would be interrupted and that [these countries] would be left half-way,” she said.
This article was translated and edited by Stina Lunden.
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