‘Nothing on table’ as Spain, Italy, Cyprus strains rise: EU

BRUSSELS (AFP): The European Union said Tuesday it had “nothing on the table” in terms of debt rescue planning for Spain, Italy and Cyprus despite bond yields for the big two hitting the highest levels since the euro was created.

“The question of a programme of emergency aid is certainly not on the table,” said Chantal Hughes, speaking for Economic Affairs Commissioner Olli Rehn, after Spanish Prime Minister Jose Luis Rodriguez Zapatero postponed his summer holiday owing to concern about the economy.

Zapatero acted after the difference in borrowing costs for Spain and Italy, against benchmark Germany, rose sharply in Tuesday bond trading.

Cyprus, meanwhile, is struggling with a rising public deficit about to get much worse with billions of euros in damage caused after a blast at a military base and banks over-exposed to neighbouring Greek debt.

Hughes, standing in for economic affairs commissioner Olli Rehn’s regular spokesman, said there was nothing drawn up if bailouts were required. The European Union executive is a central part alongside the European Central Bank and the International Monetary Fund in all eurozone bailout planning.

Economists say problems for Italy and Spain, as the region’s third and fourth biggest economies respectively, could wreck the euro -- constructed in 1999 -- and there are also fears that these countries may not now be able to finance their bailout commitments later this year for Greece.

Hughes said experts at the European Commission were “monitoring very, very closely” the return of euro debt fears after the US debt crisis commanded all the recent attention.

After a second rescue for Greece was agreed by eurozone leaders at a July 21 emergency summit, she said experts from eurozone states held another telephone conference call last week and that authorities have “full confidence” in the Spanish and Italian programmes of economic reform and fiscal consolidation.

“Both countries are taking the necessary action to put their economies back on track,” she said, although she also said that markets as ever would decide. There was “no reason to think that the situation had changed in the last few days,” she added, saying there was close contact with Madrid and Rome and that the position for both countries “has not dramatically changed.”