BAILOUT POLITICS

PP and Socialists forge pact ahead of tense EU summit

Government and opposition to join forces in vote on amended fiscal stability law

The government and the main Socialist Party will come together to try to show the rest of Europe a united Spanish front by voting together in solidarity for the fiscal stability pact in Congress on Thursday. The move comes ahead of an EU summit starting on June 28, which is expected to be a tense affair as solutions to the ongoing euro crisis are discussed.

In the past few weeks, Prime Minister Mariano Rajoy and Socialist opposition leader Alfredo Pérez Rubalcaba have been holding a series of secret talks to look at ways of forging a common position before the European meeting. The Socialists have been calling for European mechanisms to stimulate growth in Spain and not just a package of austerity measures -- a position that is shared by French President François Hollande.

On Monday, Finance Minister Cristóbal Montoro publicly called on the European Central Bank (ECB) to intervene and help prop up the Spanish bond market as yields surged to more than seven percent. He told a Senate budget hearing that the ECB "should respond firmly [...] to these market pressures that are still trying to derail the joint euro project."

Rajoy, in Los Cabos, Mexico for the G20 Summit, said earlier he wanted the ECB to act to defend the euro zone by resuming its massive bond-buying program. This view was also shared by Rubalcaba, who was in Santander.

Socialist deputies in Congress have proposed an amendment to the fiscal stability pact, which calls on the ECB "to temporarily reactivate its program of purchasing bonds on the secondary market and promote expansive monetary policies." The proposals also call for "an emergency plan to fight youth unemployment" and a "European investment strategy."

Taking advantage of the French Socialist victory in parliamentary elections on Sunday, which gives Hollande solid domestic backing, Rubalcaba said that Rajoy will soon have to choose between the opposite positions taken by the French president, who wants Brussels to introduce growth mechanisms, and German Chancellor Angela Merkel, who is proposing additional cuts in troubled European states.

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