19.5 C
October 6, 2022

Eurozone agrees to lend Spain up to EUR 100 bln

The money would go directly into Spain’s own bank rescue fund, which has only about USD 6 bln left, far short of the tens of billions needed to bolster several failing Spanish banks.

Euro zone finance ministers agreed on Saturday to lend Spain up to EUR 100 bln (USD 125 bln) to shore up its teetering banks and Madrid said it would specify precisely how much it needs once independent audits report in just over a week, BBC informs. After a 2 1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts. Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies – Oliver Wyman and Roland Berger – deliver their assessment of the banking sector’s capital needs some time before June 21. Economy Minister Luis de Guindos said at a news conference in Madrid that the amounts needed would be manageable and that the funds requested would amply cover any needs. According to Euronews, De Guindos was careful to avoid the word “bailout.” But if Madrid accepts the full amount on offer its rescue would be larger than previous bailouts for Portugal and Ireland, though less than half the size of Greece’s two loans combined. “What we are asking is financial support, and this has absolutely nothing to do with a full bailout,” De Guindos said. Spain will specify exactly how large a loan it plans to accept after the results of independent bank audits come back June 21, he said. De Guindos said that because the European loan would be earmarked only for recapitalizing Spanish banks, his government would not be subject to additional austerity measures. The money would go directly into Spain’s own bank rescue fund, which has only about USD 6 bln left, far short of the tens of billions needed to bolster several failing Spanish banks. Spanish Prime Minister Mariano Rajoy has hailed a decision by eurozone finance ministers to help Spain shore up its struggling banks as a victory for the common currency. “It was the credibility of the euro that won,” he told reporters.A bailout for Spain’s banks, beset by bad debts since a property bubble burst, would make it the fourth country to seek assistance since Europe’s debt crisis began, Wall Street Journal informs. The European aid will rise country’s public debt by 10 pc, from 68.5 pc of GDP. With the rescue of Greece, Ireland, Portugal and now Spain, the EU and IMF have now committed around EUR 500 bln to finance European bailouts. Washington, which is worried the euro zone crisis could drag the U.S. economy down in an election year, welcomed the announcement. “These are important for the health of Spain’s economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area,” U.S. Treasury Secretary Timothy Geithner said. Likewise, the Group of Seven developed nations – the United States, Germany, France, Britain, Italy, Japan and Canada – heralded the move as a milestone as the euro zone moves toward tighter financial and budgetary ties. Officials said there had been a heated debate over the International Monetary Fund’s role in Spain’s bank rescue, which Madrid wanted kept to a minimum. The IMF will not provide any of the money. In the end it was agreed that the IMF would help monitor reforms in Spain’s banking sector, while EU institutions would ensure Spain stuck to its broader economic commitments. IMF Managing Director Christine Lagarde said the euro zone’s plan was consistent with the IMF’s estimate of the capital needs of Spain’s banks and should provide “assurance that the financing needs of Spain’s banking system will be fully met.” Sources involved in the talks said there had been pressure on Madrid to make a precise request right away, but Spain had resisted.

Moody’s: spain, greece may trip more rating cuts

Moody’s Investors Service said late Friday that developments in Spain and Greece may prompt downgrades of other European countries, Voice of America informs. While Spain’s bank problems are mostly limited to the country, they could prove damaging to the sovereign rating of Italy, which is relying more on the European Central Bank, Moody’s said. On the other hand, the rising risk of a Greek exit from the euro zone places particular pressure on the credit ratings of Cyprus, Portugal, Ireland, Italy, and Spain, the agency said. “However, should Greece leave the euro, posing a threat to the euro’s continued existence, Moody’s would review all euro area sovereign ratings, including those of the Aaa nations,” it said in a statement.


Related posts

Independent patrimony experts support mining in Rosia Montana

Nine O' Clock

PwC, the first consulting firm to open a local office, celebrates 30 years in Romania


Finance Ministry schedules bank loans of 3.57 bn lei, in December

Nine O' Clock