Spanish PM urges euro fiscal authority to end current crisis
The premier says authority would also go a long way to alleviating Spain's financial woes.
On Saturday, Spanish Prime Minister Mariano Rajoy urged euro zone leaders to set up a new fiscal authority to manage the bloc's finances and send a clear signal to markets that the single currency project is irreversible.
The prime minister said the authority would also go a long way to alleviating Spain's financial woes, which, along with the prospect of a Greek euro exit, have threatened to derail the single currency project.
It is not the first time a European leader has proposed creating such an authority, but the problems and the size of Spain - a country deemed too big to fail - have prompted EU policymakers to hurriedly consider measures such as creating a fiscal and banking union ahead of a EU summit on June 28-29.
Germany, the unofficial paymaster of the euro zone, and others insist such a move can only happen as part of a drive to much closer fiscal union and relinquishing of national sovereignty.
Overspending in the regions and troubles with a banking sector badly hit by a property crash four years ago have sent Spain's borrowing costs to record highs and pushed the country closer to seeking an international bailout.
The Spanish government, which has hiked taxes, slashed spending, cut social benefits and bailed out troubled banks, argues there is little else it can do and the European Union should now act to ease the country's liquidity concerns.
In private, senior Spanish officials have said this could be done by using European money to recapitalize directly ailing banks or through a direct intervention of the European Central Bank on the bond market.
They have also said the euro zone should quickly move toward a fiscal union to complete its 13-year monetary union, but Rajoy went a step further by making a formal offer.
"The European Union needs to reinforce its architecture," Rajoy said at an event in Sitges, near Barcelona. "This entails moving toward more integration, transferring more sovereignty, especially in the fiscal field.
"And this means a compromise to create a new European fiscal authority which would guide the fiscal policy in the euro zone, harmonize the fiscal policy of member states and enable a centralised control of [public] finances," he added.
Rajoy also said the authority would be in charge of managing European debts and should be constituted by countries of the euro zone that meet strict conditions.
The establishment of the new authority would require a change in the European Union treaties, a usually lengthy and politically painful process which requires ratification in the 27-member states of the bloc.
Germany has said further integration in Europe was required, including additional controls on national public finances, and was ready to consider revising the treaties if needed.
U.S. billionaire George Soros said Saturday that Germany and its central bank are unlikely to be able to lead the way out of the euro zone debt crisis within three months, after which it will be too late.