–Adds Comments From German Government To Story Sent At 06:17 GMT

BERLIN (MNI) – German Chancellor Angela Merkel and her Finance
Minister Wolfgang Schaeuble want Spain to apply for financial aid from
the European bailout fund EFSF to prop up its banking system, the German
weekly Der Spiegel reported over the weekend, citing no sources.

According to the magazine, last week at their meeting in Berlin,
Schaeuble urged Spanish Finance Minister Luis de Guindos to request aid
from the EFSF in order to prevent contagion of the debt crisis to
further Eurozone members. Guindos rejected that demand, Der Spiegel
said.

Experts of the German government estimate that Spain’s banking
sector needs additional capital of E50 to E90 billion, Der Spiegel
wrote.

German government spokesman Steffen Seibert said on Monday that it
is up the Spanish government to decide whether it will apply for aid
from the EFSF and accept the conditions tied to it.

“If there is the need for aid, everybody knows that Europe is
ready, that Europe is showing solidarity and that Europe has the tools
to help,” Seibert said at a regular government press conference here.
“But the decision on this — once the numbers [of the capitalisation
need of Spanish banks] are available — lies solely with the Spanish
government,” he asserted.

The German Finance Ministry said Friday it supports the European
Commission in giving Spain more time to meet its deficit targets.
Spokesman Johannes Blankenheim said that the ministry acknowledges that
“due to an unfavorable economic development it can become difficult” for
Spain to meet its deficit targets.

EU Economics and Monetary Affairs Commissioner Olli Rehn said on
Wednesday that the European Commission would be prepared to give Spain
an extra year to reach its budget deficit target, provided Madrid comes
up with a convincing budget plan for 2013-2014 and ensures the country’s
regional governments rein in spending.

Meanwhile, the German weekly Welt am Sonntag (WamS) reported over
the weekend that ECB president Mario Draghi, EU Commission president
Jose Manuel Barroso, EU Council President Herman van Rompuy and
Eurogroup Chairman Jean-Claude Juncker were drawing up a master plan for
deepening the European integration.

According to the paper, the plan includes a fiscal union, a banking
union, a political union and structural reforms. The proposals will be
included in the resolutions of the upcoming EU summit later this month.
However, the German government warns against expecting too much from the
June summit, stating that only a road map is to be decided there, WamS
said.

German Finance Ministry spokesman Blankenheim said Friday that
regarding the EU proposal for a banking union with a common EU-wide
deposit guarantee scheme, the ministry does “not currently see how such
considerations can be helpful for coping [with the Eurozone sovereign
debt crisis] in the short term.”

Merkel is to discuss the proposals for an EU reform as well as
current crisis developments with Barroso in Berlin this evening,
spokesman Seibert said today. The two leaders are scheduled to deliver a
statement at 17:00 GMT ahead of their talks.

Seibert reaffirmed that the government still strongly opposed joint
Eurobonds as a tool to combat the crisis. “Eurobonds are under no
circumstances a solution now,” he said. Eurobonds “will play no role
whatsoever” in the talks between Merkel and Barroso today, he said.

Seibert repeated that Germany sees Eurobonds only as a possibility
in the distant future when a real fiscal union has come about in Europe.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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