Rehn rebuffs Portuguese efforts to alter political conditions for bailout
EU ECONOMICS commissioner Olli Rehn brushed off a push from Portugal to rethink European demands on the country’s political leaders to agree a common economic policy before a general election in June.
Saying a rapid cross-party agreement was important both for Portugal and for Europe, Mr Rehn said such an accord was crucial if an EU/IMF bailout deal was to be reached by mid-May.
Experts from the EU Commission, the European Central Bank (ECB) and the IMF will meet Portuguese civil servants tomorrow to assess the country’s aid requirement.
Political meetings with the main Portuguese parties take place next week.
The commissioner was speaking on Saturday afternoon at the end of a two-day informal meeting of EU finance ministers near Budapest.
The meeting was dominated by Portugal’s request for aid, but high-level sources said Berlin was coming under pressure to declare its willingness to boost the capital of any German bank that fails new bank stress tests.
“We need of course very, very robust and credible stress tests and also all the backstops that would be necessary,” said ECB chief Jean-Claude Trichet.
Although the EU ministers want Portugal’s leaders to align themselves behind a common economic programme before the election on June 5th, Portuguese president Anibal Cavaco Silva said the county needed an “interim” rescue deal first.
Saying the election winner could negotiate the final elements of the bailout programme when it entered government, Mr Cavaco Silva also said the country’s main political parties were in agreement on fiscal targets until 2013.
“I hope our partners will take into consideration that we are moving toward elections on June 5th,” he said in Budapest on Saturday.
But Mr Rehn’s response was dismissive. “We have already shown quite a lot of imagination and especially responsibility as regards how to overcome the economic difficulties of Portugal both for the sake of Portugal and for the sake of Europe,” he said.
“I would prefer not to have public dialogue every day with the leaders of Portugal, whom I highly appreciate.
“We will now define a strategy which will ensure that there can be a swift cross-party agreement on a programme of fiscal adjustment and structural reforms that by mid-May could be presented by the commission, the ECB and the IMF for the finance ministers to be decided.
“That’s the plan, so let’s now calmly and swiftly start to work.”
Amid renewed reports that some European governments believe it is no longer possible for Greece to surmount its difficulties without restructuring its debt, Mr Rehn said that was something he excluded.
In spite of efforts to downplay any threat of contagion from Portugal, Italian minister Giulio Tremonti said it was not possible to say if the rescue would stop the turmoil from spreading to countries such as Spain.
However, German minister Wolfgang Schäuble said he thought Spain was in a “good condition” and that the markets shared that judgment.
It was the German minister himself who was in the spotlight as the new European Banking Authority set the rules for new stress tests whose results are due in June.
“This is rigorous and realistic and will show who is stronger and who is less strong in the European banking sector,” said Mr Rehn of the test criteria.
Tougher tests could threaten two German Landesbanken – NordLB and Heleba – but Mr Schäuble insisted public money would not be available for recapitalisations.
There is some frustration with Germany’s stance, as EU authorities see the new test as a key opportunity to prove their determination to tackle residual weaknesses in Europe’s banking system.