Zapatero laments German input in deepening euro-zone debt crisis

Spanish Prime Minister José Luis Rodríguez Zapatero on Tuesday indirectly pointed the finger at Germany for sparking the latest bout of turbulence in the sovereign debt market by broaching the idea of private investors shouldering some of the burden in a second bailout for Greece.

In order to restore calm to the markets, "all of the countries in the euro zone have to accept responsibility, particularly the most powerful countries," Zapatero said at a joint news conference in Madrid with the visiting European Union President Herman van Rompuy.

Spain's risk premium hit a new euro-era high of over 375 basis points early on Tuesday before recovering to close at 314 points, down from Monday's closing level of around 335 basis points. That was still well above levels of around 150 basis points seen in July of last year.

The blue-chip Ibex 35 ended the session down 0.69 percent at 9,603.40 points after at one point having lost some four percent. The banks led the recovery, with most of them closing in positive territory as Santander put on 0.22 percent and BBVA 0.72 percent.

"There is nothing new about Spain; there is a problem about the sustainability of Greek debt," Zapatero said. "The main problem is the opening of the debate on private participation. This debate was not opened well and it has not been closed," he added.

"When you make a proposal it has to be definitive, and the effects of it have to be evaluated. Spain maintains that exploring formulas for the participation of the private sector is not the right way to go, except in the case of a serious, credible proposal that instills confidence, because otherwise it could have a negative impact."

Van Rompuy said he had no plans to call an extraordinary meeting of European leaders, but did not rule out doing so. Sources subsequently said he had begun contacts to call a meeting of euro-zone leaders for Friday.

Dutch Finance Minister Jan Kees de Jaegar on Tuesday told reporters that euro-zone finance ministers had accepted the idea of a role for the private sector in a second bailout package for Greece, and that this would involve losses that would be tantamount to a selective default.

The European Central Bank is strongly opposed to heading down that route, further highlighting the fissures that have emerged in terms of Europe's stance on Greece.

Economy Minister Elena Salgado acknowledged that Europe had dragged its feet in finding a solution to the Greek problem. "We are many countries, and at times we need time to reach an agreement."

Salgado said the uncertainty surrounding Greece was the main reason behind the current turmoil in the markets, which is spilling over onto other euro-zone members with high levels of debt and low growth prospects.

In an interview with Spanish radio station Cadena Ser, the minister said Europe needs to be more flexible by lowering the rate paid by Greece on bailout funds and by extending the maturities of its loans.

Salgado said the market response to Italy and Spain was not "logical" and predicted things would eventually calm down. "The markets need to know that we are going to do everything that is required to guarantee stability," Salgado said.

Zapatero said Spain could afford an increase in its borrowing costs as the state budget had been drawn up to accommodate this. "We are looking at an increase in the costs of debt, which we hope will be temporary if Europe gives a response."

The prime minister, who met with Salgado on Tuesday, said the government was on track to meet its deficit-reduction targets, but added it had adopted a "stance of daily vigilance because we have to maintain our credibility at the highest level."