Former Spanish Prime Minister Jose Luis Rodriguez Zapatero continues to make wave before his book on the European crisis is published. Earlier he had mentioned that German Chancellor Angela Merkel had approached him before a G20 meeting to dictate bailout terms on a hallway. Now he is expanding on that comment:
Zapatero, who served as prime minister between 2004 and 2011, told CNBC that the loose monetary policy pursued by the European Central Bank (ECB) helped overheat Spain’s housing market, leading to its crash in 2008. The subsequent hit to Spain’s banking sector saw the government accept 41 billion euros ($56 billion) of aid to rescue its banks, although it avoided a wider sovereign bailout.
“The monetary policy of low interest rates – followed since the birth of the euro right up till the crisis – was designed for the German reconstruction. But what effects did it have for countries like Spain? It created a huge expansion of credit… which created bubbles,” said Zapatero, who led the Spanish Socialist Workers’ Party (PSOE), in an exclusive interview with CNBC.