Eurogroup approves Spanish bank aid
July 20, 2012
Finance ministers from the countries that use the European Union's common currency, the euro, have approved an aid package worth up to 100 billion euros ($122 billion) for Spanish banks.
The 17 ministers gave the green light to the move during a telephone conference call on Friday.
"We have formalized what we discussed in the past two Eurogroup meetings. We have formally approved the memorandum that lays out the conditions under which Spain can be lent money for the recapitalisation of its banks," Luxembourg's finance minister, Luc Frieden, told reporters in Brussels.
"The approval of all 17 ministers is there, and that means that the programme can continue. Money will not flow immediately, because work on the analysis of the specific banks is ongoing."
However, an initial tranche of 30 billion euros is to be released by the end of July to deal with urgent needs. The money is to come from the eurozone's temporary rescue fund, the European Financial Stability Facility, which still has around 250 billion euros left following its bailouts of Greece, Ireland and Portugal. Funding of the Spanish bank aid is to be taken over by the permanent European Stability Mechanism, when it becomes operational, sometime later this year.
Depth of hole unclear
It is not known exactly how much money Spain's banking sector will require, but an audit conducted by consultancy firms Oliver Wyman and Roland Berger and published in June put the figure at 62 billion euros.
The finance ministers' approval of the financial aid comes a day after the Spanish parliament approved a package of spending cuts and tax increases worth 65 billion euros.
The austerity measures are unpopular with the Spanish public. Hundreds of thousands of people took to the streets of the country's cities on Thursday to protest against the latest measures meant to help reduce the public deficit.
pfd/sej (Reuters, AFP)