MADRID (AP) — Spain’s economy minister on Thursday defended the country’s unpopular austerity measures pushed through this year by Prime Minister Mariano Rajoy, ahead of a key visit to Madrid by German Chancellor Angela Merkel.
Spain’s government is under pressure to accept a sovereign bailout for its public finances that could come with conditions that would mean more economic pain for a country in a deep recession with unemployment at nearly 25 percent.
But Luis de Guindos said Spain has already made significant progress this year with labor reforms and efforts to reduce a growing deficit through tax hikes and spending cutbacks.
“Spain is doing what Germany did 10 years ago,” de Guindos told a gathering of Spanish and German business leaders at the presidential palace ahead of the Rajoy-Merkel meeting.
Over the last decade, Germany has raised its retirement age, amended its constitution to require a balanced budget and put in place labor market and welfare reforms. A key round of measures in 2003 reduced job benefits and protections — and was criticized at the time for cutting away at a cherished social welfare system.
While Rajoy and Merkel meet, the European Central Bank is expected to announce a plan to buy government bonds from countries like Spain which are struggling with high borrowing costs on their debt.
Rajoy said in an interview published Thursday that he views the possibility of an ECB bond program as part of its broader role beyond its key function of keeping inflation in check for the 17 countries that use the euro common currency.
“Orthodox thinking is very good, and I stand by it,” he told Germany’s Frankfurter Allgemeine Zeitung newspaper. “But everything is not always black or white.”
Spain has already accepted a loan of up to €100 billion ($126 billion) to rescue its banks. But the government is struggling to pay punishingly high interest rates to raise money on bond markets. Investors are concerned that the country cannot afford to protect its financial system and its heavily indebted semiautonomous regional governments without asking for a full-blown sovereign bailout.
Before Merkel arrives, Spain will hold a bond auction that will be a test of investor sentiment.
The interest rate on Spain’s benchmark 10-year bond fell to 6.24 percent Thursday morning ahead of the auction, but that level still makes it difficult for the government to finance itself. And it is close to the 7 percent rate that forced Greece, Ireland and Portugal to ask for sovereign bailouts.
Rajoy also told the newspaper that he believes Spain’s economy will turn around during the slightly more than three years he has left in office, while acknowledging deep frustration among Spaniards facing increasingly tough economic times with no immediate end in sight.
“All steps in the right direction will bear fruit,” he said. “Reforms and austerity measures usually have, however, no immediate effect and that is difficult to explain to the country’s citizens.”
Associated Press writer David Rising contributed from Berlin.
More Related Stories
- Illinois' fracking and coal rush is a national crisis
- Developers evict historic women's shelter to build luxury hotel
- Kaitlyn Hunt refuses plea offer, will go to court over high school relationship
- DHS admits "impossible" to control 3D-printed guns
- Journalists file suit against Manning trial secrecy
- Russia: Syrian regime ready to talk peace
- Report: Nearly a quarter of all Americans struggle to afford food
- Ted Cruz against the world
- Louie Gohmert: Women should be forced to carry nonviable pregnancies to term
- 2 men arrested for endangering commercial aircraft
- Oversized load blamed for bridge collapse
- This is what Guy Fieri looks like as a balloon
- Iran hackers aiming at U.S. energy firms
- Lawyers release data in attempt to discredit Trayvon Martin
- Anonymous rallies behind Kaitlyn Hunt
- Bridge collapse: Part of "aging infrastructure"
- Mistrial in penalty phase of Arias case
- Amanda Bynes arrested after hurling bong from window
- Interstate 5 bridge collapses north of Seattle
- Mississippi could begin prosecuting women for miscarriages
- Teenage girl claims she was beaten up for looking like Taylor Swift
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11