A recession in Spain and forecasts of rising unemployment in the 17-nation euro area are amplifying criticism of the German-led austerity agenda in election campaigns this week in France and Greece.
With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek a bailout. In France, with the final round of presidential elections on May 6, Socialist frontrunner Francois Hollande pushed back against German Chancellor Angela Merkel’s focus on deficit reduction.
The EU is working on an investment package of 200 billion euros ($265 billion) for infrastructure, renewable energy and technology in the euro-area’s worst-hit countries, El Pais newspaper reported, citing unidentified officials familiar with the plan. The funds will come from 12 billion euros from the European Financial Stabilization Mechanism to boost the capital of the EIB, El Pais said.
Rajoy in March scrapped Spain’s aim to cut its budget deficit to 4.4 percent of output this year after a slumping economy threw the nation’s ambition to consolidate its finances off course. As Spain pushes through the deepest budget cuts in at least three decades, the country’s banks probably need 50 billion euros in capital, according to Morgan Stanley estimates.