Spain, Portugal for quick Greek bailout decision

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Spain, Portugal for quick Greek bailout decision

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Spain and Portugal has demanded quick Greek bailout decision to shield them against debt crisis.

25 January,2012 01:43 am

The prime ministers of Spain and Portugal said Tuesday they want next weeks European Union summit to adopt measures that will help shield them against contagion from Greeces debt crisis.The Iberian peninsula neighbors are both going through hard economic times, leaving them vulnerable to market jitters as Athens fights to avoid a default that would have repercussions across the entire 17-nation eurozone and beyond.Spanish Prime Minister Mariano Rajoy and Portuguese Prime Minister Pedro Passos Coelho said they are committed to cutting their debt levels through austerity measures and fostering growth through economic reforms.The leaders said they are both in favor of a new EU treaty that would introduce stricter laws against overspending and want it swiftly enacted. EU leaders are meeting in Brussels Monday to discuss the draft of that treaty.Overshadowing the summit is Greeces ongoing effort to clinch a deal with its private creditors about the terms of a bond swap, especially the interest rates it carries.We need a quick decision on Greece, Rajoy told a news conference with Passos Coelho. Its something we have to do as soon as possible so we can all start getting back to normal.Rajoy said Spain will follow Portugals lead in demanding sacrifices from people to restore the countrys fiscal health.Earlier this month Spains Parliament approved the new conservative governments first austerity measures. They include €8.9 billion in spending cuts and tax increases to bring in an extra €6.2 billion.Rajoy said his government will announce further fiscal measures on Friday, and is also planning labor market reforms. Spains 21.5 percent unemployment rate is the highest in the 17-nation eurozone.Rajoy said the steps are unavoidable.Spain is expected to fall back into recession this year, with the International Monetary Fund on Tuesday predicting a 1.7 percent contraction in 2012.Portugal is struggling to extricate itself from its debt crisis. Unemployment stands at a record 13.2 percent, and its economy is forecast to contract by 3.1 percent this year.The budget deficit fell to below 5 percent last year from 9.8 percent in 2010, but the sharp drop was largely due to the transfer to the Treasury of €6 billion in private banks pension funds. Without the transfer, the 2011 deficit would be around 7.5 percent way off the target of 5.9 percent officials say.