DAVID GREENE, HOST:
And now let's turn to Europe's economic troubles. Over the weekend, finance ministers in Europe agreed to lend a hand to Spain - up to $125 billion, specifically - to save the nation's banks from collapse.
An editorial in Spain's leading newspaper, El Pais, declared we can now imagine a future in which Europe's economic nightmare is behind us. Before this move, there was widespread fear that Spain's banking crisis could have a devastating impact on the global economy. But is the nightmare truly over?
To answer that question, we've turned to NPR's Philip Reeves, who is gauging reaction to this deal in Europe. Phil, good morning.
PHILIP REEVES, BYLINE: Good morning.
GREENE: So, a lot of the reason for this bailout of the Spanish banks was to restore confidence in the Spanish economy. And I guess that's question one. How are the markets responding so far?
REEVES: Positively, at least for now. Shares and commodities are up, so is the euro. The markets had been very worried about the gaping hole in Spain's banking system. They're worried about contagion, that this would be a threat to the eurozone and the survival of the single currency. So, they're greeting this big bailout agreement over the weekend with considerable relief.
GREENE: And how long, I guess, can the relief last? I mean, one of the lessons we've learned through this entire debt crisis in Europe is that nothing can be easy.
REEVES: Right, exactly. I mean, no one's in much doubt that this the tourniquet. It's not a long-term solution to the eurozone's underlying fundamental problems, which concerns a lack of a fiscal union. So, no one's in any doubt that there's more turbulence ahead. In fact, this weekend, there are these all-important elections in Greece. That might lead to Greece leaving the euro. If that happens, there'll probably be more panic. That will renew market pressure on other struggling eurozone nations, driving up their borrowing costs still further.
And there's another thing, you know, that's really important to remember here. This loan to Spain of up to $125 billion will be added onto Spain's existing debt burden. By European standards, Spain's national debt is not all that high, but its economy's in recession, it has very high unemployment. There's no sign of a light at the end of the tunnel. And some analysts are saying now that if the Spanish add more to their debt, the bond markets might well decide that it's an even greater risk. And that means Spain's already alarmingly high borrowing cost without even going further.
GREENE: Well, let me ask you about the Germans. I mean, they're always so critical in sort of how things are playing out in Europe. I mean, there's talk now, as you said, of Greece leaving the eurozone, if these elections go in one direction versus the other. I mean, how is Germany responding?
REEVES: Well, the German government has welcomed the deal. The Spanish are very relieved that they got this loan without having to sign onto a big austerity program supervised by outsiders from the European Union and the IMF. That's what Ireland and Portugal and Greece had to do when they got their bailouts. That, of course, means a big loss of economic sovereignty and that's very, very sensitive.
But, you know, there are conditions. And it's interesting that the president of the Buddhist bank has been saying, you know, he's kind of reminding Spain that it must pursue economic reforms still further. It's done quite a few, but it's got to pursue them further. And that includes reforms in the labor market. So, the Germans are reminding the Spanish that there are conditions attached to all of this.
GREENE: And, Phil, one thing you mentioned was that we don't have details yet about this Spanish deal. And Spain is, of course, the fourth eurozone country to get a bailout. We had Ireland, we had Greece, we had Portugal. I mean, how are those countries reacting? And is there a risk they're going to say, you know, why is Spain getting a sweeter deal than we did?
REEVES: Yeah, this actually is very important. Greece, Ireland, and Portugal did have to sign on to tough austerity EU-IMF programs, caused a lot of resentment. Brussels and Berlin have been telling the Greeks, for example, that they got to stick to their program or risk being booted out of the eurozone. So, now in Greece, parties that want to tear up that program are citing Spain's deal as unfair. And in Ireland, the government there is under pressure for their deal to be renegotiated.
GREENE: NPR's Philip Reeves speaking to us from London. Phil, thanks a lot.
REEVES: You're welcome.
(SOUNDBITE OF MUSIC)
GREENE: And you're listening to MORNING EDITION, from NPR News. Transcript provided by NPR, Copyright National Public Radio.