Spain has formally requested European financial assistance of up to €100 billion for its banks, according to a statement issued by the country’s economy ministry.
Spain’s economy minister Luis de Guindos said that the final amount required would be established before the next scheduled eurogroup meeting on 9 July, but that €100bn should be sufficient to cover all of the banks’ needs and also to provide an additional security buffer, hence the early request. De Guindos outlined his thinking in a letter issued to Luxembourg’s prime minister and chairman of the group of eurozone finance ministers, Jean-Claude Juncker.
According to the Spanish economy minister the country’s authorities would offer “all their help” in deciding the loan’s eligibility criteria, conditions, required measures and contract definition in time for the 9 July meeting. He added that the state-backed Fund for Orderly Bank Restructuring (FROB) would act as the vehicle channelling funds to banks in need.
De Guindos acknowledged that bolstering the capital of Spain’s banks would not be “an instantaneous process”. A study of the industry conducted by four auditors is scheduled for publication at the end of July, followed by a more in-depth analysis in September. Further liabilities and bailouts may yet be revealed as the full extent of the bursting of Spain’s mammoth property bubble becomes clear.
By Neil Ainger