RENEE MONTAGNE, HOST:
The economy, of course, looms large in President Obama's quest for reelection, though the health of the U.S. economy continues to be tied to what happens in Europe. Germany is Europe's largest economy, so it's had a lot of say about what should happen next. And yesterday, Chancellor Angela Merkel was in Spain, just as Spaniards were absorbing details of a new Europe Central Bank plan aimed at saving its economy. It is the Central Bank's most ambitious plan yet, an offer to buy an unlimited amount of short term bonds from trouble euro countries, to help those countries to get lower interest rates. It comes as Spain has imposed harsh budget cuts and is weary of the strings attached to the Central Bank's offer. Lauren Frayer has this report on the Merkel visit to Madrid.
UNIDENTIFIED GROUP: (chanting in Spanish)
LAUREN FRAYER, BYLINE: It wasn't the warmest of welcomes. Up to a thousand protesters crowded outside a European Union building in downtown Madrid, screaming at Angela Merkel to go home.
MARIA DEL SOL: I used to love the German people, because I have lived many years in Germany. But at this moment, the only feeling I have for Angela Merkel and everything she represents, I mean, I hate her.
FRAYER: To protesters like Maria del Sol, a 38-year-old shipping broker, the German leader has become a scapegoat for anger over austerity. Fellow demonstrator Rafa Martinez is 29, unemployed and moving abroad next month in search of work. He accuses Merkel of meddling in Spain's affairs.
RAFA MARTINEZ: That makes me sick. I mean, it's like actually our prime minister is Angela Merkel. I mean, that's absolutely ridiculous.
FRAYER: For her part, Merkel says she has no intention of bossing Spain around. She spoke to reporters after talks with Prime Minister Mariano Rajoy.
CHANCELLOR ANGELA MERKEL: (German spoken)
FRAYER: I didn't come here to say what reforms Spain should or should not take, she said. I have plenty of confidence in the Spanish government and I am impressed by the measures it's taking. Rajoy had promised Spaniards that even though they're suffering painful cuts to things like health and education, and unemployment is near 25 percent, he would shield Spain from strict conditions that came with EU rescues for Greece and others.
GONZALO GARLAND: It's a question of politics and also national pride, you know, having to be rescued.
FRAYER: Economist Gonzalo Garland, at Madrid's IE Business School, says Rajoy is scrambling to make punishing budget cuts himself, rather than accept a formal bailout and have them forced on him by the so-called troika - the European Union, European Central Bank and the International Monetary Fund.
GARLAND: You have less degrees of freedom and the troika would probably impose things Spain doesn't want to do, like reduced pensions.
FRAYER: At first, the big concern was Spanish banks, drowning in debt left over from the real estate bust. So Rajoy secured EU loans for them earlier this summer - up to $125 billion dollars. But delivery of that money has been delayed, so Spain's government has had to divert some of its own revenue to keep banks afloat.
It's also had to divert money to overspent regional governments, and to more unemployment benefits, as the jobless rate rises. All this makes it virtually impossible for Spain to make ends meet, says economist Javier Diaz-Gimenez, at IESE Business School.
JAVIER DIAZ-GIMENEZ: We have not been capable of bringing the deficit down in any sizable way. So we cannot do it. So then we will be rescued. When? Sometime soon.
FRAYER: Rajoy had been hoping an ECB bond-buying program might be the answer. The central bank announced yesterday that it would buy Spanish or Italian debt, to help lower borrowing costs. But Spain would first have to request aid.
So the option Rajoy thought might save him from a bailout, may actually force him into one. After his meeting with Merkel, and the ECB announcement, Rajoy was asked whether his bailout request is now imminent. But the notoriously guarded prime minister gave nothing away.
PRIME MINISTER MARIANO RAJOY: (Spanish spoken)
FRAYER: When there is news I will tell you, Rajoy told reporters. For NPR News, I'm Lauren Frayer in Madrid. Transcript provided by NPR, Copyright National Public Radio.