Spanish Prime Minister Mariano Rajoy ratcheted up pressure on German Chancellor Angela Merkel to back new ideas for a resolution of the debt crisis as he urged European leaders to bolster efforts to protect banks.
With markets bracing for further deterioration in Spain’s finance sector and a possible Greek departure from the 17-member euro area, Rajoy on June 2 added his voice to calls for a more robust “banking union” in Europe, lending his support for a centralized system to re-capitalize lenders. On the same day, Merkel toughened her opposition to euro-area debt sharing, telling members of her party in Berlin that “under no circumstances” would she agree to German-backed euro bonds.
Cyprus, the bloc’s third-smallest economy, is also increasingly likely to seek a bailout if recapitalization efforts for Cyprus Popular Bank’s fail, ECB Governing Council member Panicos Demetriades said yesterday. Greece, Ireland and Portugal have already received assistance.