The European Finance ministers agreed early on Tuesday to grant Spain an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings. They also set the parameters of an aid package for Spain’s ailing banks.
The decisions were aimed at preventing the currency area’s fourth largest economy, mired in a worsening recession, from needing a full state bailout which would stretch the limits of Europe’s rescue fund and plunge it deeper into a debt crisis.
“There’s no emergency here, there’s a clear path towards stabilization,” Luxembourg Finance Minister Luc Frieden said of the measures agreed for Spain. “The markets have to realize that the money is there, more money than is necessary.”
But markets were disappointed the meeting did not offer more. The euro initially traded near a two-year trough against the dollar and hit a five-week low versus the yen, with sentiment edgy as the focus shifted to a German court hearing.
Germany’s top court also will pick up the issue on Tuesday about whether Europe’s new bailout fund and budget rules are compatible with national law in a process influencing not just how to tackle the euro zone crisis, but how much deeper European integration can go.
via Yahoo Finance