Brussels, 28/06/2012 (Agence Europe) - The institutions which will be Spain's future creditors began their work on the evening of Wednesday 27 June of assessing the financial needs of the Spanish banking sector and the conditions that will be imposed for future financial aid (see EUROPE 10641). The European Commission will take the lead, working in cooperation with the European Central Bank (ECB), the European Banking Authority and the International Monetary Fund (IMF). The IMF will provide only technical assistance.
In a statement adopted on Wednesday 27 June, the Eurogroup welcomes the formal request by Spain for financial assistance, which came the same day as Cyprus asked for aid (see related article). The Eurogroup says Spanish needs will not exceed €100 billion, a sum which includes “an additional safety margin”. The assessment team will confirm the estimates of two independent auditors commissioned by Spain which puts the additional capital needs of the Spanish banking sector within a range of €51-62 billion. It will also decide on the conditions with which Spain will have to comply in exchange for the aid. These measures will target the financial sector, “including (bank) restructuring plans in line with EU State-aid rules and horizontal structural reforms of the domestic financial sector”.
The Eurogroup expects the Spanish state, which will remain responsible for the orderly conduct of the whole process with regard to its Eurogroup partners, will comply with its budgetary commitments (reduction of the excessive deficit from 8.9% to 5.3% of GDP in 2012 and to 3% in 2013) and pursue “structural reforms” with a view to correcting any macroeconomic imbalances. “Spain has no classical aid programme. But given the interconnectedness between the situation in the banking sector and state finances, we must also keep an eye on the development in the Spanish state budget”, ECB Chief Economist Peter Praet said in the FT Deutschland of Thursday 28 June. The aid will come initially from the European Financial Stability Facility (EFSF) and later from the European Stability Mechanism once it comes on stream. (MB/transl.rt)