BERLIN (AP) — Germany's finance minister argued Friday that Spain doesn't need to seek a new aid program, and dismissed suggestions that money left over from a rescue package for its banks might be used to buy the country's government bonds instead.
Spain has been granted up to €100 billion ($130 billion) in European aid to shore up its ailing banks but has been balking at seeking a broader rescue package as it struggles with high borrowing costs. Such a package would come with strings attached, though it's not clear how onerous they would be.
German Finance Minister Wolfgang Schaeuble told foreign reporters he agrees with his Spanish counterpart that "Spain is on the right track and doesn't need another program."
Schaeuble said Spain likely won't need the full €100 billion offered for its banks but dismissed suggestions that money that isn't needed for recapitalizing them could instead be used to buy Spanish government bonds in an effort to bring down the country's borrowing costs.
"I don't think much of this debate," he said, adding that using money meant for bailing out banks for something else is "a dangerous idea."
According to Europe's latest financial aid plans, a country like Spain could either ask for a full bailout of its government finances or a standby credit line. Both would come with conditions, though the standby credit would not involve regular monitoring of the country's state finances.
Analysts say stock and bond markets have risen in Europe on speculation that Madrid will accept some form of aid. Spain is due to announce new austerity reforms next week that could satisfy the conditions for such financial support.
Turning to bailed-out Greece, Schaeuble insisted that "Greece must deliver" on its deficit-cutting and reform pledges, but wouldn't be drawn on what happens next — pointing to a report from the country's international debt inspectors expected next month. That report will determine whether Greece receives the next instalment of loans that are essential to keeping it afloat.
"No one wants Greece to leave the euro, but that doesn't answer the question of whether this second (rescue and reform) program for Greece has been fulfilled and implemented," he said, insisting again that Greece's existing rescue program goes "to the limits of what can be economically justified."
