German finance chief douses Spanish market rally
Wolfgang Schäuble pours cold water on idea of rescue fund buying debt of Spain and Italy
The rally in the Spanish financial markets, seen since European Central Bank President Mario Draghi last week pledged to defend the euro at all costs, screeched to a halt on Tuesday as German Finance Minister Wolfgang Schäuble poured cold water on the idea of the European rescue fund being allowed to buy the sovereign debt of distressed euro-zone members such as Spain and Italy.
Shooting down a suggestion from ECB member Ewald Nowotny, Schäuble said he did not see the need to grant the European Stability Mechanism a banking license in order to borrow from the ECB to buy euro-zone sovereign debt.
Hopes of anything substantial emerging from the ECB’s monetary policy committee on Thursday also dimmed. On a more upbeat note, Italian Prime Minister Mario Monti said earlier on Tuesday that both Spain and Italy would soon see “light at the end of the tunnel” of the euro crisis.
Spain’s risk premium rose 23 basis points to 546, while the blue-chip Ibex 35 index closed down 0.94 percent at 6,738.10 points after early gains.
