Finance ministers from the 17 countries that use the euro were to discuss a potential rescue for Spain yesterday, a eurozone official said, as pressure grows on Madrid to sort out its troubled banks even if it means seeking a European bailout.
The latest report — from the IMF — estimated that Spain needs at least a 40 billion euro (US$50 billion) capital injection following a stress test it performed on the country’s financial sector. That report came out early yesterday, three days ahead of schedule, underscoring the urgency of the situation.
Spanish Deputy Prime Minister Soraya Saenz de Santamaria said on Friday that the government would wait for the results of three reports, including the IMF one and two from independent auditors, before acting. However, pressure is rising on the country, and the government appears to have resigned itself to the fact that it needs a bailout with money pumped in from Europe to prop up its struggling banks, and cannot handle the job on its own.
A spokesman for Luxembourg Prime Minister Jean-Claude Juncker, who chairs the meetings of eurozone finance ministers, said that the ministers would discuss the situation in a conference call yesterday afternoon.
Guy Schuller said that Spain had not yet asked for help, “but we want to prepare if the call comes.”
Officials at the Spanish Ministry of the Economy did not immediately respond to requests for comment.
If it does request a bailout, Spain would become the fourth eurozone country to do so since the continent’s debt crisis touched off two years ago. The three countries that have received rescues thus far — Greece, Ireland and Portugal — are fairly small, and many have worried that bailing out much-larger Spain could call the entire euro project into question. Officials must walk a fine line between giving Spain enough money to make a rescue credible, if one is asked for, and not bankrupting the system.
On Friday, Saenz de Santamaria declined to say how much the sector, hit by the collapse of the country’s real-estate bubble, might need. Estimates of the cost of bailing out Spain’s banks vary greatly, from 40 billion euros to as much as 100 billion euros.
Spain has been accused of being too slow to set out a roadmap to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil sparked by the Greek elections on Sunday next week.
“What we now crucially need is transparency and trust,” said Andreas Schmitz, the head of Germany’s banking association. “Any further uncertainty, any speculation how the situation could develop is poisonous for the markets.”
However, others said it was more important for Spain to correctly assess how to shore up its banking system than it was to hurry into a bailout. The audits that Spain’s government is waiting for are crucial to determining precisely how much capital the nation’s troubled banks need, Capital Economics analyst Mark Miller said. The reports from independent auditors are due by June 21.
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