Rajoy and Hollande said that the agreement on the ESM rescue fund (officially approved on Monday at the Ecofin summit but still not activated) should be implemented as soon as possible as the last obstacle, its ratification by the German Constitutional court, had been cleared. The Spanish and French leaders also called for a clear signal from the European Council to step up EU banking integration and the implementation of the growth pact.
Mariano Rajoy went on to comment on the situation in Spain, saying that the recent IMF growth forecasts might not be accurate and that he expects a better result this year. He assured that his goal would be to prevent these pessimistic projections form coming true. Hollande added that without growth in Spain there would be no strong growth in France.
IMF: EU inaction could push Spanish risk premium up to 750 points
The IMF continues to alert Europe on Wednesday to the risks connected with not providing adequate aid to distressed countries such as Spain. The organization believes that Spanish GDP could fall 3.2% in 2013 and its risk premium could soar to 740 points.
The first results of lack of EU action could be a massive deleveraging of banks and a rapid drop in credit concessions, which could be reduced by 18%.
In the worst-case scenario, Spain could witness a 3.2% GDP drop in 2013. Apart from that, the country's risk premium would rise to 750 points, considerably increasing unemployment levels and drastically reducing investments.
José Viñals, IMF's Financial Counselor, said during a press conference that the situation in the Eurozone is the main risk for global financial stability. Viñals called for a quick implementation of the agreements reached during the latest EU summits, including the launching of the new banking supervision organism.
