Spanish Bank Bailout Agreed, EU to Lend up to €100bn
Eurozone finance ministers decided on Saturday to lend Spain up to €100bn ($125bn, £80bn) to save its troubled banking sector.
The aid is expected to cover all capital requirements Spain’s banking sector needed.
“The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total,” said the Eurogroup statement.
The decision came after a heated conference call by the Eurogroup, the group of finance ministers from the 17-nation single currency area which lasted about two and half hours.
Madrid is yet to decide on the exact bailout fund they needed which will be decided after the results of the independent audits of the banking system by auditors Oliver Wyman and Roland Berger.
The results are expected before 21 June.
“The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it,” said Spain’s Economy Minister Luis de Guindos at a news conference in Madrid.
The funding would be from the two funds created to help eurozone members in financial trouble – the €440bn European Financial Stability Facility (EFSF) and its successor the €500bn European Stability Mechanism (ESM), which comes into force in July.
Why Spain Bailout Different from Others
However, there are considerable differences in the bailout conditions on Spain and other aid recipients.
Unlike the other three nations, which are already the recipients of the EU bailout fund for their sovereign debts, Spain’s bailout is only for its banking sector, not for the economy as a whole.
Spain’s aid is for saving its banking sector which is besieged by bad loans and property bubble burst.