Saturday

24th Feb 2018

Spain appeals for EU bail-out of struggling banks

  • Calling Europe: Montoro told Ondo Cera that 'the men in black won't be coming to Spain' (Photo: morberg)

Spain's budget minister has during a radio interview appealed for an EU bail-out of the country's banks.

Speaking on Tuesday (5 June) on the Onda Cero radio station, Cristobal Montoro said: "Europe should move swiftly to allow its institutions to directly boost the capital of troubled banks in Spain."

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

He added: "The amount needed by Spain's banking system isn't very high, nor excessive. What matters is the procedure to provide such an amount - and that's why it is important that European institutions open up and proceed with this."

His reference to "direct" aid to banks is an appeal for the Union to use its Luxembourg-based EFSF bail-out fund to help Spanish lenders.

The alternative - a bail-out of the Spanish state involving the EFSF and the International Monetary Fund (IMF), as in Greece, Ireland and Portugal - comes with outside supervision of national finances and would increase the country's budget deficit.

He said Spain can no longer borrow money from markets due to loss of confidence which has seen borrowing costs shoot up compared to Germany.

"What that premium says is that market doors are not open to Spain," he noted.

The cost of a Spanish bank rescue is being estimated at between €40 billion and €90 billion.

Montero added that a full-blown EU-IMF bail-out is unfeasible because the EFSF has €440 billion in the pot, while Spain, the eurozone's fourth largest economy, owes foreign lenders almost €1 trillion.

"Spain can't really be bailed out, from a technical point of view ... The men in black are not going to come to Spain" he said, referring to EU and IMF finance inspectors.

The Spanish Prime Minister, Mariano Rajoy, and its King, Juan Carlos, also appealed for EU solidarity in separate remarks the same day.

Rajoy told the Spanish senate: "Europe must say where it is going, to show unity, it must say the euro is an irreversible project, that it is not in danger, it must help countries which are in difficulty."

King Juan Carlos said while in Chile: "Europe needs austerity and discipline but ... solidarity is also necessary to make the financial burdens that crush some of our countries today more bearable."

Oui

The Spanish cry got a sympathetic ear in France.

French foreign minister Laurent Fabius told media while visiting Rome also on Tuesday that the EU should take a flexible approach to Madrid.

He said: "We have to find mechanisms, methods to bring the necessary funds to allow the system to continue to function properly."

He added that if Spain is forced to save its banks itself it will cannibalise the country's budget: "If, to save the bank, you have to increase the deficit ... then it's the snake eating its tail."

Nein

Germany - which believes Montoro's idea would spread risk to German banks - rejected his plea.

Volker Kauder, the chief whip of Chancellor Angela Merkel's Christian Democratic Union party, told the ARD TV station on Wednesday morning: "I do not see this possibility."

He added: "Germany will demonstrate its solidarity with other states in Europe ... but the states of Europe must for their part undertake every endeavour to contribute to solving those problems themselves."

The European Commission will on Wednesday propose plans for an EU "banking union" to prevent a Spanish-type scenario in years to come.

But Montero's words will be tested already on Thursday at an auction of €2 billion worth of Spanish bonds.

Spain may speed up EU 'banking union'

The US has joined ranks with EU officials exploring ways to pump eurozone money directly into Spain's troubled banks, with creation of a "banking union" now considered a matter of eurozone survival.

Brussels: 'Banks should pay for banks'

The EU commission has unveiled proposals to change the too-big-to-fail rationale that has seen billions of euros of public money pumped into ailing banks.

Opinion

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

News in Brief

  1. EU calls for immediate ceasefire in Syria
  2. UK's post-Brexit vision is 'pure illusion', Tusk says
  3. EU leaders express solidarity with Cyprus in Turkey drill row
  4. EU to double funding for Sahel forces
  5. EU parliament president: 'The immigration problem is Africa'
  6. May to unveil EU departure strategy next week
  7. Pregnant workers may be dismissed, EU court rules
  8. Romanian minister demands anti-corruption prosecutor fired

Stakeholders' Highlights

  1. ILGA EuropeAnkara Ban on LGBTI Events Continues as Turkish Courts Reject NGO Appeals
  2. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  3. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  4. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  5. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  6. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  7. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. EU agrees budget to focus on defence, security and migration
  2. EU leaders nix transnational lists, cool on 'Spitzenkandidat'
  3. Regions chief: calls for smaller EU budget are 'impossible'
  4. Election fever picks up This WEEK
  5. EU-Morocco fishing deal casts doubt on EU future foreign policy
  6. EU leaders put 'Spitzenkandidat' on summit menu
  7. European far-right political party risks collapse
  8. The key budget issues on EU leaders' table