Eurozone finance ministers eyed an up to €100 billion strings-attached rescue of Spain’s distressed banks at emergency talks yesterday.
The solution must come quickly- Jean-Claude Juncker
With banks in the eurozone’s fourth largest economy hobbled by heavy losses on real estate, finance ministers in the 17-nation Eurogroup held an emergency conference call to outline a rescue deal for Spain.
“The amount on the table at the moment is as much as up to €100 billion but this hasn’t been decided yet,” a senior EU official told AFP on condition of anonymity.
Asked whether the eurozone would set conditions in return, the source said: “Conditions to the Spanish government but these will only entail a clean-up of the financial sector.”
Unlike bailouts already approved for Greece, Ireland and Portugal, Spain is believed to have been lobbying discreetly for a deal focused purely on helping banks, thus avoiding outside interference with its sovereign affairs.
There has been no official request from Madrid for a rescue and despite intense pressure from eurozone nations, Spain has been reticent about a bailout.
Leaders of the single currency area are keen for quick action to avoid further contagion ahead of an unpredictable election in Greece in just a week that could in the worst case see Athens quit the eurozone.
“The solution must come quickly,” Jean-Claude Juncker, the Luxembourg premier who heads the Eurogroup, told German radio late on Friday.
Wading in yesterday, German central bank chief Jens Weidmann urged Madrid to resort to the eurozone financial rescue fund, the EFSF.
“If Spain feels overwhelmed by its financial needs, it should use the instruments which have been created for that.” he said.
In Madrid, a government source said officials were examining an International Monetary Fund report on its banks and would wait for the outcome of the ministers’ conference call that began at 4 p.m. yesterday before commenting on a bailout request.
“There is a meeting that was called by Brussels. We are waiting to see the results and we are analysing the IMF report,” the source said.
Spanish authorities appeared resigned to formally asking for help, a European government said, and had unofficially launched the process a few days ago.
If Spain, which faces deteriorated public finances and widespread unemployment, does ask for help it would mean eurozone leaders have failed in their desperate attempts to contain the debt crisis to Greece, Ireland and Portugal.
A Spanish bailout would thrust the eurozone into uncharted waters because Spain’s economy is more than twice the size of those three countries combined.
The IMF bank stress tests, which were unveiled three days ahead of schedule, determined that Spanish banks need about €40 billion in new capital.
But a fund official said banks would probably need more than that to build a “credible firewall” against financial market speculation.