German Fin Min Doesn't Expect Portugal Events to Spark Euro Zone Crisis

By Harriet Torry

BERLIN--German Finance Minister Wolfgang Schaeuble doesn't think the recent political upheaval in Portugal threatens to unleash a crisis of the single currency, he said Thursday, as financial markets now judge the euro to be sufficiently stable to withstand domestic upheavals in member states.

The resignations of Portuguese Foreign Minister Paulo Portas and Finance Minister Vitor Gaspar earlier this week have cast doubt over whether Portugal can stick to austerity measures under the terms of its 78 billion euro ($101.2 billion) rescue two years ago.

The German Finance Minister brushed off concerns the political crisis there may throw the whole bloc into chaos, saying such developments are "normal in democracies," but said he nonetheless regrets the resignation of Mr. Gaspar.

Mr. Schaeuble also acknowledged that the euro zone still faces challenges, one of which is the credit crunch for small and medium-sized companies which is choking growth in struggling economies.

Mr. Schaeuble met Thursday with his Spanish counterpart in Berlin to sign off on previously-announced plans for Germany to lend small and medium-sized companies in recession-hit Spain EUR800 million via German state-owned bank KfW and Spanish state-owned business lender Instituto de Credito Oficial.

Spanish Finance Minister Luis de Guindos told reporters there is no conditionality attached to the loans.

Small and medium-sized companies in Spain still face trouble accessing credit from banks at reasonable rates despite the ongoing low interest rates from the European Central Bank.

The German move, which it has said it will emulate in Greece and Portugal to differing degrees, is aimed at boosting employment and growth. German Economics Minister Philipp Roesler said at the press conference a strong Spain is in Germany's interest.

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