Brussels, 08/06/2012 (Agence Europe) - The deputy Spanish prime minister, Soraya Sáenz de Santamaría, said on Friday 8 June that no decisions had been taken about whether Spain would apply to the EU for financial aid. He said after a cabinet meeting that the government was busy working with the IMF and auditors to work out how much money would be needed to completely restore finances in the Spanish banking sector, and said the government would be making announcements once the figures were known.
Reuters broke the news that Madrid will be making a formal request for aid for its banks on Saturday, which are suffering from toxic mortgage debt. It is reported that Spain will make the request before a Eurogroup video conference, but as we were going to press, there was no official news of any such video conference. A spokesperson for Euro Commissioner Olli Rehn would only comment that the European Commission has not yet received any request for help and if a request were to be made, the appropriate bodies (the EFSF) are in place and ready to be used. The day before, the German chancellor, Angela Merkel, the Polish finance minister, Jacek Rostowski, and the Swedish finance minister, Anders Borg, all made similar comments.
The report due to be published by the IMF on Monday will say that Spanish banks need some €40 billion. Two auditors are expected to publish their estimates over the next fortnight. Fitch downgraded Spain's credit rating by three notches to BBB on Thursday and says that Spanish banks will need between €60bn and €100bn. A spokesperson for Rehn said that the estimates were not very precise. On Thursday, Spain managed to roll over more than €2 billion-worth of medium and long-term debt, although the rate was quite high for the ten-year bonds (6.4%).
Spain's reluctance to ask for international financial aid is because under the current EFSF rules, any request for financial aid necessarily comes with structural adjustment and austerity strings attached. Hannes Swoboda MEP (S&D, Austria) told this newsletter that the Spanish prime minister, Mariano Rajoy, has not asked for aid because he can't sell the idea of the troika of lenders to the Spanish people. Like the three countries currently in receipt of international aid in the eurozone, Spain does not like the idea of the humiliation it feels it would suffer if an austerity package is imposed from outside and is reluctant to agree to any more austerity because its partners agree that it is already doing everything possible despite the economic recession. Behind the scenes, negotiations are underway for a special loan without many strings attached to help Spain bail out its banks, which are under pressure due to toxic mortgage lending. Ireland was forced to ask for international aid in 2010 when its banks collapsed and has warned that it will want to renegotiate the terms of its aid package if Spain is granted more favourable terms than Ireland. (MB/transl.fl)