Spain’s ailing banks will likely not need to tap all the 100 billion euros (US$125.7 billion) that has been made available by the country’s euro partners, Spanish Minister of the Economy Luis de Guindos said on Monday.
In a further indication that Spain’s economic problems are not as acute as some in the markets have been fearing, De Guindos also said that no additional austerity measures would be needed to meet the Spanish government’s deficit-reduction target. Spain is battling to avoid the same bailout fate as Greece, Ireland, Portugal and Cyprus.
However, De Guindos said Spain’s most troubled bank, Bankia, will get urgent aid, while two indebted Spanish regions appealed for emergency funding to deal with a crippling liquidity crunch.
Spain’s banks have an estimated 184 billion euros in problematic real estate loans and investments following the collapse of the country’s property market in 2008. The other 16 eurozone countries have set aside the rescue package to help troubled Spanish lenders.
“In principle, it looks like not all of [the 100 billion euros] will be used,” De Guindos told Onda Cero radio.
De Guindos said austerity policies being enacted by the government would be enough for Spain to meet its target of reducing the budget deficit to 6.3 percent of national income this year from 9 percent last year. The government has already unveiled a 65 billion euro package of tax hikes and spending cuts.
Spain agreed late on Monday to make an emergency injection of 4.5 billion euros (US$5.7 billion) into Bankia SA, buying new shares in the lender nationalized in May. Bankia has become the poster child for the country’s hurting banks, saddled by billions in soured real-estate assets.
Bankia has called for a total of 19 billion euros in public aid. The total amount that will be injected into Bankia should be made public in coming weeks after audits of Spain banks are completed, said a statement from the Fund For The Orderly Restructuring Of Banks, a bank rescue fund set up to help Spain’s deeply troubled financial sector.
De Guindos predicted that the 100 billion euros in bank rescue funds would become available by early November, once the banks’ restructuring plans are unveiled in the middle of this month.