Spain to get longer to reach budget goal

Mon Jul 9, 2012 6:17pm EDT
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By Robin Emmott and John O'Donnell

BRUSSELS (Reuters) - European ministers were set to grant Spain an extra year to reach its deficit targets in exchange for further budget savings but remained far from pinning down details of bank rescues and emergency bond-buying that are of greater concern to markets.

As finance ministers of the euro zone met in Brussels late on Monday, a top European Central Bank policymaker said the 17-nation currency area's debt crisis was now more acute than the 2008 financial turmoil that felled U.S. investment bank Lehman Brothers.

"The euro zone crisis is now much more profound and more fundamental than at the time of Lehman," ECB Executive Board member Peter Praet told a conference in Lisbon.

Eurogroup finance ministers were tasked with fleshing out a bare-bones agreement reached by EU leaders at a summit last month on establishing a European banking supervisor and using the bloc's rescue funds to stabilize bond markets.

But with differences persisting between north European countries such as Finland and the Netherlands and southern states led by Italy and Spain, EU officials said no breakthroughs were likely this week.

ECB President Mario Draghi endured at times hostile questioning in the European Parliament, notably from German, Dutch and Finnish lawmakers concerned at the prospect of European bank bailouts using taxpayers' money.

German Finance Minister Wolfgang Schaeuble sought to defuse growing opposition at home by saying it would take time to establish a European bank supervisor and only once it was fully in place might ministers decide to allow direct recapitalization of ailing banks by the euro zone's rescue fund.

Schaeuble said he expected ministers to agree on a timetable for up to 100 billion euros ($123 billion) in aid for debt-stricken Spanish lenders.   Continued...

Moroccan national Hayat Loukrichi kisses her mother Fatima before learning that the family's eviction has been suspended in Madrid July 9, 2012. Their eviction, which has been caused by their failure to pay the rent to their landlord, has been postponed to October 26, 2012. Spain's bailed-out Bankia is seeking the foreclosure of the house after the landlord failed to pay the mortgage. REUTERS/Juan Medina