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Eurozone ministers 'to discuss Spain bank bailout'

Category: Business

Published: 9th Jun 2012 04:35:14

Eurozone finance ministers are to hold a conference call to discuss a bailout for Spanish banks, the BBC understands.

EU sources say Madrid could formally request financial assistance for its troubled banks this weekend.

So far Spain has denied reports that an announcement on a European rescue plan for its banks is close.

The International Monetary Fund (IMF) is estimating that Spain's banks need a cash injection of at least 40bn euros ($50bn; £32bn).

The IMF said on Friday that a "stress test" showed Spain's financial sector was well managed but "vulnerable".

EU authorities earlier played down reports that Spain would ask for help as early as Saturday.

But in an interview on Portuguese radio, European Central Bank Vice President Vitor Constancio said the call for assistance was expected soon.

"It is expected that Spain will formulate a request for aid exclusively for banks recapitalisation," he said.

"There has to be an expression of will to have such a programme for Spanish banks, and one may hope it happens rather swiftly."

The BBC's Tom Burridge in Madrid says Spain is under pressure from Brussels to act, possibly before the feared uncertainty that could follow next weekend's Greek elections.

Spanish Prime Minister Prime Minister Mariano Rajoy has insisted that any decision will come after the results of an independent audit on the Spanish banking system, which are due out within two weeks.

The audit will produce a figure of how much money, in total, is needed to prop-up Spain's banks.

A rescue deal would see money passed first to the Spanish government and then to the troubled banks.

Because Madrid has already announced tough financial reforms it is likely that a deal would only carry limited conditions, our correspondent says, unlike the full-blown bailouts for Greece, Portugal and Ireland.

Reuters reported that eurozone deputy finance ministers would first hold a conference call on Saturday morning to discuss a Spanish request for aid.

President Obama says he doesn't want to scold, but his comments on Friday certainly sounded like a stern lecture.

It is clear now that the US presidential election will take place against a poor economic background which may get worse before November. Mr Obama is telling the American people it is Europe's fault.

There is genuine frustration that Europe's leaders never get the message.

Mr Obama's view is that what is needed is firm action to save the banks and that it should be done as a piece of political theatre that shocks confidence back into the markets.

The Eurogroup of finance ministers would then discuss the issue on another conference call, the news agency said, citing unnamed EU and German officials.

A downgrade of Spain's creditworthiness by rating agency Fitch earlier this week has been seen by some as adding to the urgency of shoring up Spain's finances.

European leaders have to make difficult decisions to steer the eurozone away from crisis, US President Obama said on Friday.

He said the US would support Europe as it implemented the hard solutions needed to solve the ongoing debt crisis.

He said a deep new recession in Europe would have an impact on the US economy.

Greece's future in the eurozone was a matter for the Greek people, he said, but "further hardship" must be expected if the country chose to leave the euro.

Greeks will go to the polls on 17 June to try and end a political impasse that eurozone leaders say is harming Greece's ability to tackle its economic crisis.

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BBC News, 2012. Eurozone ministers 'to discuss Spain bank bailout' [Online] (Updated 9th Jun 2012)
Available at: http://www.ukwirednews.com/news/1433589/Eurozone-ministers-to-discuss-Spain-bank-bailout [Accessed 16th Apr 2014]

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