ECONOMY

In Brief

Spanish PM points to differences with Greece Spain is in a «completely different situation» than Greece and investors need assurances that Greek budget cuts and a European Union-led rescue package are a solution to the debt crisis, Organization for Economic Cooperation and Development chief Jose Angel Gurria said. «We should be very careful and very responsible to avoid comparisons that don’t apply,» Gurria, secretary-general of the OECD, said in a television interview in Rome yesterday. «Now the most important thing is that this is recognized by markets as a solution.» European stocks dropped and the euro fell to its lowest level in a year yesterday on concern that a 110-billion-euro ($145 billion) rescue package for Greece isn’t enough to stop the debt crisis from spreading to other nations. Credit default swaps on Spain rose 29.5 basis points to 187, Portugal added 39 bps to 314, and Ireland increased by 27 bps to 204, CMA DataVision prices show. «My concern is with contagion and, if you don’t stop the problem, the problem can spread very fast,» Gurria said. He said on April 29 that the crisis could go viral, such as the fatal Ebola virus. (Bloomberg) Gov’t still spending big on weapons despite crisis Greece is one of Europe’s biggest weapons purchasers but, despite its economic crisis, cannot cut the multi-billion-dollar bill without being sure of peace with archrival Turkey, analysts said. Turkish Prime Minister Recep Tayyip Erdogan is to visit Greece next week, underscoring progress made in bilateral relations but Greece is still buying warplanes, submarines and weapons even as it accepts a 110-billion-euro international rescue package. A warning to the Greeks to reconsider their priorities came from International Monetary Fund chief Dominique Strauss-Kahn, who noted Sunday that military spending would be «clearly reduced» under the bailout. In February, the Defense Ministry said that because of the «urgency» of the debt crisis, it hoped to cut about 700 million euros in arms spending this year. Greek Defense Minister Evangelos Venizelos has said the defense budget, including armed forces wages, would be 6 billion euros this year, or 2.8 percent of national output. Athens spent the same amount on arms purchases in 2008, according to NATO, a higher percentage of output than that of France and Britain. «It would be ideal to be able to drastically cut military spending but this is something that can only be done simultaneously with Turkey,» said a Greek government source, speaking on condition of anonymity. (AFP) Agencies reviewed The European Commission has told credit rating agencies to watch their step when judging a country’s financial health, saying they would probe their work and could even set up a central agency to take over this job. It is the clearest warning yet from the 27-country bloc’s executive to an industry that senior European officials have criticized privately for being too harsh in downgrading Greece as it teetered on the edge of financial collapse. «I think we need to go further to look at the impact of the ratings on the financial system or economic system as a whole,» Michel Barnier, the commissioner in charge of an overhaul of financial services, told the European Parliament. «The power of these agencies is quite considerable not only for companies but also for states. That’s why I asked for responsibility to be assumed in the work they are doing,» he said, adding that the Commission would examine possible conflicts of interest. (AFP) Aid temporary Greece’s financial aid is intended to help service debt only until the nation can tap capital markets and may not cover its needs after 2012, German Economy Minister Rainer Bruederle said. The 110-billion-euro ($144 billion) bailout approved on May 2 was «never designed» to cover Greece’s entire financing needs over the course of the three-year package, Bruederle told reporters in Berlin yesterday. «I expect Greece to make the efforts necessary to be able eventually to sell loans on the market.» Greece may need 150 billion euros over the next three years, the Bild newspaper said yesterday in a report that cites comments made to lawmakers yesterday by German Deputy Finance Minister Steffen Kampeter. If Greece can’t sell bonds in 18 months’ time, then the euro group will need to step in to top up aid, Kampeter was cited as saying. (Bloomberg)