Spain Formally Requests Bailout

An illustration shows a close-up view of the `Espana` stamping on a Spanish One Euro coin, as seen in Duesseldorf, Germany, 08 June 2012. Photo by BGNES

Spain has formally requested a bailout loan from its euro zone partners for up to EUR 62 B in financial aid for its troubled banking sector.

"I have the honor to write to you, in the name of the Spanish government, to formally request financial assistance for the recapitalization of the Spanish banks that require it," wrote Economy Minister Luis de Guindos, in a letter to Eurogroup president Jean-Claude Juncker.

Guindos' letter also expressed appreciation to the Eurogroup -- the 17 nations that use the euro as their common currency -- for offering to support Spain on June 9 with up to EUR 100 B for its troubled banking sector.

No specific figures were given for the emergency loans, although independent audits last week said that the banks would need up to 62bn euros to stabilize themselves.

But Spain's economy ministry said that the audits, and a report from the IMF, should be a starting point.

The letter said that Spain planned to sign a memorandum of understanding for the package by 9 July, which would include details such as exactly how much would be borrowed.

It said the amount would be enough to cover all the needs of its banks and an additional security buffer.

Olli Rehn, European commissioner for economic and monetary affairs welcomed the request from Spain.

"Restructuring the banking sector is key to reinforce the confidence in the Spanish economy and to restore the conditions to proper access to credit by companies and households, thus for sustaining the recovery," Rehn said in a statement.

He added that his staff were working on the conditions that would be applied to the loans, including conditions for the banks and for the supervision and regulation of the whole banking sector.

He also said that he expected Spain to work to make its public finances sustainable and bring down its deficit.

"There cannot be sustainable growth without sustainable public finances, both at national and sub-national levels," he said.

"Progress in these areas will be closely and regularly reviewed in parallel to the financial assistance."

Spain's banks have been struggling with bad loans following the collapse of its property market.

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