May 30, 2012

PARIS — Faced with the growing fears about Spain, the European Commission signaled Wednesday that it was prepared to show flexibility on the country’s tough deficit targets, a recognition that the crisis that has convulsed Greece is showing signs of infecting other euro countries.

The European economic and monetary affairs commissioner, Olli Rehn, told a press conference in Brussels that if Spain “can effectively control the excessive spending,” the commission was “ready to consider” extending by one year the 2013 deadline Spain faces to bring its budget deficit down to 3 percent, in line with European rules.

Spain is headed for a budget deficit of 6.4 percent of gross domestic product this year, the commission said on May 11, and 6.3 percent next year.

Mr. Rehn spoke after the commission released recommendations calling on Europe to take more steps “towards full economic and monetary union, including a banking union; euro area financial supervision and euro-area wide deposit guarantees.”

The commission also called for the creation of euro bonds and cautioned François Hollande, the new French president, against overspending in trying to spur growth.

Europe’s economic stagnation and continuing financial turmoil in the euro zone have weighed on confidence, the commission said earlier in a report. The commission’s indicator of business sentiment in the 17-nation euro zone fell in May to 90.6 from April’s revised 92.9. The decline, it said, “was driven by falling confidence in all business sectors, especially in industry and retail trade.”

Jonathan Loynes, an economist in London with Capital Economics, noted that the sentiment data showed “acute weakness across the peripheral economies,” but that the Dutch, French and Germans were also less optimistic. He described it as “overall, an unambiguously weak picture which only looks likely to get worse as the debt crisis continues,” and predicted that euro zone gross domestic product would decline by 1 percent this year, with 2013 “likely to be much worse.”

With Washington increasingly concerned that the euro crisis will spill over into the United States, and into election-year politics, Treasury Secretary Timothy F. Geithner has dispatched Lael Brainard, a Treasury undersecretary for international affairs, to Europe for meetings with senior officials “to discuss their plans for achieving economic stability and growth in Europe,” according to a Treasury statement.

Americans “fully recognize the very difficult sacrifices the Greek people are making,” Ms. Brainard said in a statement, and they back the Greeks “as they stand by their commitments to continue the path of reform.”

The European Central Bank said Wednesday that Ms. Brainard met Wednesday with members of the bank’s executive board, but a spokeswoman said she could not say whether Ms. Brainard met with Mario Draghi, the E.C.B. president.

Ms. Brainard will be also be in Spain and France this week.

On Tuesday, the governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, added to the sense of crisis, announcing that he would step down early, on June 10.

Mr. Fernández Ordóñez has taken some heat over a new bailout request from Bankia, the country’s biggest mortgage lender, which said Friday that it would need another 19 billion euros, or $24 billion.

The yield on Spanish 10-year bonds, which moves in the opposite direction of the price, rose 14 basis points to 6.55 percent in Wednesday afternoon trading. A basis point is one-hundredth of a percent.

At the same time, investors sought refuge in U.S. and German government debt. The yield on 10-year U.S. Treasuries fell 7 basis points to 1.6 percent, while comparable German bonds traded to yield 1.31 percent, 5 basis points lower.

At those yields, Germany could issue debt at a rate about 5.2 percentage points more cheaply than could Spain. The spread, or gap, between Spanish and German bonds reached a euro-era record earlier Wednesday, Bloomberg News reported.

Italian 10-year bond yields rose 15 basis points to 5.88 percent. The Italian Treasury on Wednesday sold 5.7 billion euros of bonds, short of the nearly 6.3 billion euros it had targeted. As part of the auction, it sold 2.3 billion euros of 10-year debt priced to yield 6.03 percent, up from the 5.84 percent it paid to sell such debt last month.

In another sign of how the euro zone’s problems are being felt in the “real economy,” the European Central Bank reported Wednesday that loans to households and companies in the currency area grew in April by just 0.3 percent from a year earlier, the weakest growth since May 2010.

Polls from Athens on Wednesday showed Greece’s June 17 election — which some are treating as a referendum on the country’s euro membership — still too close to call. A poll by Epikaira magazine showed the Syriza party, led by Alexis Tsipras, expected to win the largest share of the vote, with 30 percent, versus 26.5 percent for the pro-bailout New Democracy, but a Pulse/Pontiki poll showed the two parties running neck and neck. Whoever wins will still face the formidable task of trying to form a government.

In a separate report, the central bank said the euro zone, which is struggling to hold on to the members it has, is not likely to gain any new ones soon. In a so-called convergence report issued every two years, the E.C.B. said that none of the eight countries it examined, which include Sweden and seven formerly Soviet bloc countries, met all the criteria for joining the euro.

All the countries except Sweden have government budget deficits that are considered to high to qualify. Most of the countries also have excessive inflation, and none of them have put in place all the required measures to ensure that their central banks are independent from political influence, the E.C.B. said. The other countries are Bulgaria, the Czech Republic, Latvia, Lithuania, Hungary, Poland and Romania.

Latvia would be the next country eligible to join the euro, but not until 2014. The last country to join was Estonia in 2011. In theory, all members of the European Union are required to strive for euro adoption, except Denmark and Britain, which negotiated exemptions.

The European Central Bank also issued a statement denying press reports that said it had rejected a plan to use central bank resources to supply fresh capital to troubled Spanish banks. The E.C.B. said it had never been consulted on any plans in the first place.

The E.C.B. did not say which press reports it was referring to. The Financial Times reported in Wednesday editions that the Spanish government had planned to supply the parent company of Bankia, a troubled Spanish bank, with 19 billion euros in government bonds, which could then be used as collateral for E.C.B. loans. The E.C.B. had “bluntly rejected” that plan, the Financial Times said.

The E.C.B. has provided almost unlimited loans to banks that can supply collateral, but has maintained that its mandate does not allow it to supply banks with capital.

Spanish leaders have been trying to avoid taking aid from the European Union or International Monetary Fund to rescue Bankia. Such aid would likely come with conditions attached and force the government to cede some control.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 1.2 percent, while the FTSE 100 index in London fell 1.6 percent. The Madrid benchmark Ibex 35 stock fell 1.1 percent.

Wall Street stocks also opened lower, with the Standard & Poor’s 500 index falling 0.9 percent in early trade.

The dollar rose against major European currencies. The euro fell to $1.2443 from $1.2503 late Tuesday in New York, while the British pound fell to $1.5586 from $1.5641. The dollar rose to 0.9654 Swiss francs from 0.9606 francs. But the U.S. currency fell to 79.04 yen from 79.49 yen.

Comex gold futures fell 20 cents to $1,485.50 an ounce. Gold is down about 3.2 percent in 2012.

Asian shares declined. The Tokyo benchmark Nikkei 225 stock average slipped 0.3 percent. The Sydney market index S.&P./ASX 200 index fel 0.5 percent, and in Hong Kong, the Hang Seng index fell 1.9 percent.

Most trading is carried out by the computer programs of big banks and investment funds over high-speed networks and does not necessarily offer a complete picture of market sentiment.

Jack Ewing contributed from Frankfurt, Paul Geitner and James Kanter from Brussels, and Niki Kitsantonis from Athens.