Updated 19.24
SPAIN’S FINANCE MINISTER Luis de Guindos has told a new conference in Madrid this evening that the country will be the fourth member of the eurozone to require a bailout.
He said the Government will formally request financial aid for its troubled banking sector. However, he added that there will be no economic conditions placed on the State as a result of the bailout. Conditions will be limited to a clean-up of the financial sector.
The eurogroup has confirmed that the loans will come from eurozone sources, the EFSF/ESM, and not the International Monetary Fund. It is understood that the IMF will have an oversight role but will not actually contribute any money. In a statement, the eurogroup said that the monies will be scaled to provide an effective backstop covering all possible capital requirements which will be covered in the upcoming reports by the external evaluators and international auditors. Those reports are expected in just over a week.
The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to €100 billion in total.
According to AFP and El Mundo, there will be no austerity plan forced on Spain in return for the bailout. A eurozone official said such a macro-economic programme was not necessary.
The eurogroup added that Spain has already implemented “significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks”.
Beyond the determined implementation of these commitments, the Eurogroup considers that the policy conditionality of the financial assistance should be focused on specific reforms targeting the financial sector, including restructuring plans in line with EU state-aid rules and horizontal structural reforms of the domestic financial sector. We invite the IMF to support the implementation and monitoring of the financial assistance with regular reporting.
Pressure mounted on Spain in the past week to ask for help after the IMF’s latest report indicated it could need in the region of €40 billion to sufficiently recapitalise its banking system. A conference call between the eurozone’s 17 member countries’ finance ministers and IMF chief Christine Lagarde was held this afternoon, lasting about two-and-a-half hours.
The confirmation of an imminent request for help from Spain was welcomed by the eurogroup this evening. It said it is willing to respond favourably to a formal request expected shortly.
- Additional reporting from AP and AFP (© AFP, 2012)
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