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euro crisis

Berlin rejects calls for domestic stimulus plan to help out Spain

But bilateral plan means German companies will invest in Spanish family firms to boost local employment

German Finance Minister Wolfgang Schäuble on Monday reiterated his government’s objection to launching a domestic stimulus package to help out struggling countries such as Spain boost exports, but in an encounter with Spanish Economy Minister Luis de Guindos he floated the idea of German companies investing in smaller Spanish ones to help create jobs.

After a meeting in a luxury hotel in Loja, in the province of Granada, Schäuble and De Guindos outlined the framework of a plan that would be developed outside the auspices of European institutions and under which German companies would inject funding into solid small and midsized Spanish enterprises (SMEs).

Such investment would be jointly “sponsored” by the German and Spanish governments. Schäuble said the main thrust of the plan is to tackle high unemployment in Spain, particularly among young workers, which the German minister said was a major concern for the government of Chancellor Angela Merkel.

Spain's jobless rate hit 27 percent for the first time ever in the first quarter of this year, with the ranks of the unemployed swelling to an unprecedented 6.2 million. The youth jobless rate reached 57 percent.

“We have to explain to young people that we have assumed responsibility for the fight against unemployment,” Schäuble said in what appears to be attempt to reverse Germany’s growing image of intransigence among some of its European partners.

We don’t share the opinion that if we push for growth in Germany, this would ease the problems of others”

The German minister expressed support for the government of Prime Minister Mariano Rajoy’s austerity drive and insisted that calls for policies directed at stimulating economic growth would not achieve the desired end.

Schäuble said the origins of the current problem in the euro zone is over-indebtedness and excessive liquidity and that addressing this situation would pave the way for sustainable growth.

“We don’t share the opinion that if in Germany we were to push for stronger growth that this would ease the problems of others,” he said.

“There is a lot of money in circulation, lots of ECB money, and little investment. This is the problem,” Schäuble said.

The two ministers did not go into details of the German investment plan, which are being drawn up by both sides with the view to the document being ready for the end of May. Schäuble said the plan could be exportable to other countries.

Schäuble said one of the advantages of such a plan is that it can be implemented “immediately and directly” without the European bureaucracy’s administrative hurdles.