Madrid rounds on Monti’s criticism

Spanish prime minister Mariano Rajoy rounded on his Italian counterpart Mario Monti yesterday by calling on European leaders to be more careful when they talk about Spain as it struggles to show markets it can control its finances.

Several Spanish government sources also told Reuters that Madrid had expected more backing over its ambitious reform agenda from Europe, especially the European Central Bank.

Reports in Italian and Spanish newspapers, quoting Monti as saying Spain’s financial problems were the main reason for renewed tensions on debt markets in Europe, irritated Spain.

Monti’s office, however, denied the comments.

“I wish to say the following with regard to some statements which have been made in the EU, and more explicitly last night by some EU leaders,” Rajoy told parliamentarians, falling short of mentioning Monti by name. “We hope that they assume their responsibilities and are more cautious in their statements. We don’t talk about other countries. We wish other EU and eurozone countries the best. What is good for Spain is good for the eurozone.”

Italian newspaper Corriere della Sera yesterday said Monti told aides during a visit to the Middle East Italy was “paying on the rebound for the Spanish crisis”. Monti already caused unease in Madrid three weeks ago after publicly expressing concern about Spain’s public finances.

Italy’s one-year borrowing costs doubled at a sale of short-term bills yesterday, mirroring fresh doubts about weaker eurozone countries and highlighting market nerves ahead of a more challenging auction of three-year bonds today.

Spanish government sources said Spain needed more support from its partners for what it has done.

“Spain has done its part of the job. Now Europe has to do its part of the job as well,” a source in Rajoy’s office said.

The source was referring to the possibility of building stronger EU institutions and firewalls to protect Spain from markets’ turbulences.

Madrid has repeatedly ruled out applying for any kind of financial aid from Europe.

ECB executive board member Benoit Coeure said yesterday that what was happening in Spain, where sovereign debt yields have spiked back to 6% amid concerns over the country’s ability to cut its deficit, did not reflect the fundamentals. He added that the Frankfurt-based institution, which has injected about €1 trillion into the financial system since December, still had its bond-buying programme as an option to intervene in support of Spain.

In a sign of increased support from EU partners, Germany and France, the two heavyweights of the euro zone, praised Madrid for its “huge efforts” to reform the economy and regretted they were not recognised by investors.

— Reuters