French President Francois Hollande, left, with Spanish Prime Minister… (Christophe Karaba / EPA )
Mariano Rajoy, Spain’s prime minister, has found a new ally in his quest for lower borrowing rates and liquidity in his recession-racked country: France’s new President Francoise Hollande.
A week after his inauguration, Hollande met with Rajoy at the Elysee Palace to talk policy before heading to a European Union summit in Brussels later in the day. There, they’ll likely present a unified front against Germany’s Chancellor Angela Merkel, who has resisted Hollande’s growth proposals in favor of deficit and debt cuts.
Hollande, whose anti-austerity platform helped him beat out predecessor Nicolas Sarkozy, is pushing for his peers Wednesday night to adopt eurobonds. That’s debt issued by individual governments but supported collectively by Eurozone governments.
That proposal would require Germany to throw its weight behind struggling nations such as Greece and Spain, whose banks last week had their credit ratings downgraded by Moody’s. Unemployment in the Eurozone is at a record high 10.9%. In Spain, the rate is 24.1%; half of young Spaniards are jobless.
Unsurprisingly, Merkel has been adamant in her opposition to the eurobonds plan, even though the International Monetary Fund and the Organization for Economic Cooperation and Development have both called for similar plans.
But Rajoy said Wednesday that Spain needs borrowing rates to drop, even suggesting that the European Central Bank jump-start some emergency measures.
But according to wire reports out of Paris, the prime minister stressed that while Spain’s banks could use lower barriers for cash injections, the country won’t – unlike Greece – be asking for an international bailout.
Concerns this month that Greece was gearing up to go off the euro and return to the drachma has Greek citizens making withdrawals from their bank accounts. Some say the activity is the precursor to a bank run.
Both Rajoy and Hollande said they were committed to preventing the so-called Grexit, which would likely cause severe market instability.
Euro crisis needs 'mother of all firewalls,' OECD warns
IMF's Lagarde: All of the focus should be on achieving stability
'Grexit': Are Greece's euro fears causing a $1-billion bank run?
Follow Tiffany Hsu on Twitter and Google+