Saturday

24th Jul 2021

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."

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

News in Brief

  1. Macron changes phone after Pegasus spyware revelations
  2. Italy to impose 'vaccinated-only' entry on indoor entertainment
  3. EU 'will not renegotiate' Irish protocol
  4. Brussels migrants end hunger strike
  5. Elderly EU nationals in UK-status limbo after missed deadline
  6. WHO: 11bn doses needed to reach global vaccination target
  7. EU to share 200m Covid vaccine doses by end of 2021
  8. Spain ends outdoor mask-wearing despite surge

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. Far left and right MEPs less critical of China and Russia
  2. Why is offshore wind the 'Cinderella' of EU climate policy?
  3. Open letter from 30 embassies ahead of Budapest Pride
  4. Orbán counters EU by calling referendum on anti-LGBTI law
  5. Why aren't EU's CSDP missions working?
  6. Romania most keen to join eurozone
  7. Slovenia risks court over EU anti-graft office
  8. Sweden's gang and gun violence sets politicians bickering

Join EUobserver

Support quality EU news

Join us