Brussels, 04/12/2012 (Agence Europe) - Eurozone finance ministers are happy with progress in the Spanish bank bailout that will require nearly €40 billion of aid from the European Stability Mechanism (ESM). After a Eurogroup meeting on Monday 3 December, the head of Eurogroup, Jean-Claude Juncker, said the programme was perfectly on track and meets all the criteria, and Eurogroup welcomed the ESM's decision to authorise the first instalment of aid in the middle of next week.
The EMS managing director, Klaus Regling, said he had received an official request from Spain for aid of €39.5 billion, which would be raised by the ESM in short and medium-term bonds and then paid into the Spanish bank bailout fund, FROB, with a second instalment scheduled for January. Some €37 billion will be used to recapitalise banks bailed out by the state since the collapse of the Spanish property bubble (Bankia, Novagalicia, CatalunyaCaixa and Banco de Valencia) and €2.5 billion to finance SAREB, the “bad bank” of toxic mortgage loans. Arriving in Brussels, Spanish economy minister Luis de Guindos said three non-nationalised building societies (Banco Mare Nostrum, Caja3 and Ceiss) will need an additional €1.5 billion between them.
On Monday, German finance minister Wolfgang Schäuble ruled out the idea of direct bailouts of Spanish banks from the European Stability Mechanism (ESM), arguing that the introduction of the common eurozone bank supervisory system under the aegis of the ECB, a condition for direct bailouts, would not come into operation for Spain (see related article). The Spanish bank bailout of some €41 billion will therefore worsen Spain's public debt (currently 4% of GDP).
In terms of the budget, Eurogroup agrees with the European Commission that no new spending cuts or other consolidation measures will be needed in order for Spain to meet its budget commitments for 2012 and 2013. Juncker said Spain had taken effective measures to correct its public deficit and Euro Commissioner Olli Rehn said the Commission was ready to respond if Spain were to request aid. He pointed out that any aid might take the form of cash being earmarked at the ESM and possible activation of the ECB's sovereign debt buy-up scheme, but it was up to Spain. (MB/transl.fl)