MADRID – French President Francois Hollande called on Europe's leaders to make serious headway in introducing measures to ease the pressure on countries such as Spain.
Speaking at a press conference following talks in Madrid Thursday with Spanish Prime Minister Mariano Rajoy, Hollande urged politicians to use the next European Union summit on Oct 19. "to make decisions concerning the eurozone, lasting decisions."
"We've been putting off choices for too long, and we've let doubt take hold."
Hollande was referring to delays in introducing measures agreed at a summit in June to grant countries easier access to bailout money and set up a single banking regulator that could take the burden of bank bailouts off national governments.
The French leader's remarks came as the financial problems of Spain's regional governments put the country under even greater pressure to ask for a bailout.
Spain is in a double-dip recession with near 25 percent unemployment following the bursting of a real estate bubble in 2008. It is under fierce pressure to reduce its swollen deficit, cut central and regional government spending and clean up a banking system laden down with toxic property assets.
On Thursday, the Valencia regional government said it would have to tap a central government rescue fund for €4.5 billion ($5.6 billion) — a billion more than previously planned — to help it handle its debt. That brings to almost €11 billion the amount being sought by just three regions from the €18 billion fund set up last month.
The northeastern region of Catalonia is to seek €5.02 billion while southern Murcia intends asking for at least €300 million. Four other regions are also expected to tap the fund.
Many of Spain's 17 semi-autonomous regions, which can set their own budgets and spending plans, are struggling in the country's recession. Some of the regions, which take up almost 40 percent of public money, have overspent and are unable to borrow on financial markets to repay their huge debts.
The combined debt of the 17 regions is €145 billion, some €36 billion of which must be refinanced this year.
Spain is also being hit hard by its high borrowing costs involved in managing its debt. Hollande also added his voice Thursday to Spain and Italy's hopes that the European Central Bank will commit itself Sept. 6 to intervening in the bond markets to lower borrowing costs of heavily indebted eurozone countries. By buying up bonds, the ECB would push their prices down and the interest rates — or yields — down.
Spain has seen its borrowing costs soar on investor concern about its ability to manage its finances without outside help. Spain recently admitted it was debating applying for some sort of a bailout. It has already been granted a €100 billion loan already to help its troubled banks.
On Thursday, the interest rate demanded by investors for key 10-year bonds on the secondary market — where issued bonds are traded freely — rose 0.11 percentage points to 6.54 percent. Although lower than a month ago, the rate is edging closer to a level that is considered unsustainable in the long term.
Borrowing rates had edged down in recent weeks after Madrid intimated it might seek some a second rescue package and the ECB said it would buy Spain's bonds to help ease market pressure once the country sought help.
Hollande Thursday pointed out that the ECB*s job was not just to stabilize prices but also setting monetary policy and that countries — such as Germany — which sing the praises of the ECB's independence and oppose market intervention should realize this. He said that the exorbitant borrowing costs being paid by some countries — such as Spain and Italy — compared to others was a sufficient cause for the ECB to intervene.
Spain, along with already bailed out Greece, is at the center of the European sovereign debt crisis which has thrown a cloud of doubt over the future of the single euro currency. But Hollande defended the currency.
"Rajoy and I are tied to the integrity, the irreversibility of the eurozone. It's very important that the people ... be convinced of this irreversibility," he said.
Lori Hinnant and Sylvie Corbet contributed to this report from Paris.