* Schaeuble says Spain suffering effects of Greek contagion
* Europe shouldn't set false incentives with common debt
* Can only discuss euro bonds when have fiscal union
BERLIN, June 5 Spain is doing "everything right"
with its reform measures but the country is suffering the
effects of contagion from Greece, German Finance Minister
Wolfgang Schaeuble was quoted as saying by Handelsblatt.
Schaeuble also said the euro zone needed to realise the
medium-term project of fiscal union before discussing common
euro zone bonds.
"The Spaniards are doing everything right and nonetheless
they are coming under market pressure," Schaeuble told the
daily. "We need to manage this ...through close and trusting
Sources told Reuters that Spain's Prime Minister Mariano
Rajoy is pressing for a direct European rescue for the country's
banks with moral support from the European Commission, but
Germany is reluctant. Media reports say Berlin is instead urging
Madrid to request a full international bailout.
Asked about possible additional burdens being placed on
German taxpayers to beef up Europe's bailout funds, Schaeuble
said his government would not raise taxes.
He said Europe needed to implement what it had agreed and
fight problems where they arose without setting false
incentives, as would be the case if debt was mutualised via the
issue of joint bonds.
"The government has always said that before we can talk
about common debt management, we need a proper fiscal union."
He said euro zone policymakers including the European
Commission president and the head of the European Central Bank
had been commissioned to develop a blueprint for fiscal union.
But that was "a medium-term project," he added.