Spain makes formal request for €100bn from Eurogroup
SPANISH Economy Minister Luis de Guindos asked for up to €100bn in a letter to Eurogroup chairman Jean-Claude Juncker yesterday, saying the final amount of assistance would be set at a later stage. The letter formalises Spain's request for the bailout, agreed on June 9.
He confirmed his intention to sign a Memorandum of Understanding for the package by July 9 and said the amount should be enough to cover all banks' needs, plus an additional security buffer.
The EU's top economic official, Olli Rehn, said a deal on terms for the loan from Europe's bailout funds could be concluded within weeks.
"The policy conditionality of the financial assistance, in the form of an EFSF/ESM loan, will be focused on specific reforms targeting the financial sector, including restructuring plans which must fully comply with EU state aid rules," he said.
The rescue is intended to help Spanish lenders recover from the effects of a burst real estate bubble and a recession, which have piled up bad loans and sinking property portfolios.
Prime Minister Mariano Rajoy told business leaders he would soon take new measures to revive economic growth and create jobs.
He gave no details but said the government remained committed to cutting the public deficit.
Two independent audits last week put the Spanish banks' capital needs in a severe economic downturn at up to €62bn, and a fuller audit will be delivered in September.
Some market economists believe the rescue is merely a prelude to a full bailout for the Spanish state, which saw its borrowing costs soar to euro era record levels above 7pc early last week, although they have eased to below 6.5pc.
A working document prepared by top EU officials calls for the gradual introduction of a banking union, starting with supervisory power for the European Central Bank and developing a deposit guarantee scheme based on pooling national systems, with a levy-funded bank resolution fund.
Berlin has so far rejected any joint deposit guarantee or resolution fund, as well as proposals that eurozone governments should assume joint liability for each other's debts.
Finance Minister Wolfgang Schaeuble hammered home the message in weekend interviews, saying that throwing more money at the crisis would not solve the problems, and telling Greece it must try harder rather than seeking to soften bailout terms.
He cited Ireland and Portugal as countries that were succeeding in their EU/IMF adjustment programmes and said Greece had not made a sufficient effort.
Mrs Merkel and French President Francois Hollande, whose relationship is testy, will have one more try at narrowing their differences before the summit on Thursday and Friday.