Monday

27th Sep 2021

Eurozone agrees up to €100bn bail-out for Spain's banks

  • Madrid airport: Spain is the fourth eurozone country to receive financial assistance (Photo: Luc Mercelis)

Eurozone finance ministers on Saturday (9 June) agreed to disburse up to €100bn for Spain's troubled banks, but without an accompanying austerity programme as for Greece, Ireland and Portugal.

After a two-and-a-half hour conference call, ministers said in a press statement that "up to €100 billion" will be granted from the eurozone's bail-out funds "for recapitalisation of financial institutions."

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

The funds will be channelled directly to a state-run fund for bank rescues in Spain, the Fund for Orderly Bank Restructuring, but the Spanish government will sign a memorandum of understanding and "will retain the full responsibility of the financial assistance," the Eurogroup said.

An assessment by the European Commission, with input from the European Central Bank, the International Monetary Fund and the EU banking authority, will spell out exactly how much money is needed, "as well as a proposal for the necessary policy conditionality for the financial sector that shall accompany the assistance."

But unlike the three other bailed-out eurozone countries (Greece, Ireland and Portugal), Spain will not be submitted to a full-blown programme with inspectors regularly checking the implementation of reforms.

Eurozone finance ministers explained that Spain has already implemented "significant" fiscal and labour market reforms and has passed laws to strengthen the capital requirements for its banks.

"The Eurogroup is confident that Spain will honour its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester. Progress in these areas will be closely and regularly reviewed also in parallel with the financial assistance," the statement says.

Spain will not seek IMF assistance - again unlike its three bail-out predecessors. The Washington-based body is set to contribute only with reports on the country. It already did so on Friday (8 June) when it estimated that Spain's banks will need €37bn in the short term, not taking into account any bank restructuring or bail-outs.

The IMF report was released three days ahead schedule, as eurozone finance ministers sought to seal a deal before markets open on Monday and before crucial elections in Greece next weekend.

The prospect of Greece cancelling its second bail-out and possibly exiting the eurozone drove Spain's borrowing costs into bail-out territory and led to a downgrade by Fitch ratings agency.

Speaking in Madrid after the teleconference, Spanish economy minister Luis de Guidos said it was still unclear how much his country will actually need. But he insisted that the €100bn sum was more than enough to cover the gap and calm markets.

Two other independent audits are expected later this month, after which the final sum will be revealed. Unclear is also which bail-out fund will be used - the temporary European Financial Stability Facility or the upcoming European Stability Mechanism, due to come into force early July.

"There are no conditions of any kind on economic reforms outside of the financial sector," de Guindos said. "There are only conditions for the banks. That is all. It is an injection of capital which they will have to pay back. There are no additional conditions for Spanish society."

"This is not a bail-out," de Guindos stressed.

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 MinistersNATO Secretary General guest at the Session of the Nordic Council
  2. Nordic Council of MinistersCan you love whoever you want in care homes?
  3. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  4. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  5. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  6. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed

Latest News

  1. Scaling up tidal requires flood of new cash
  2. German coalition calculus dominates This WEEK
  3. No clear winner to succeed Merkel in Germany
  4. Banks fuelling expansion of oil-and-gas Arctic extraction
  5. The dilemma of Europe's returning female jihadis
  6. Why Draghi could be a two-term prime-minister
  7. Activists: 'More deaths' expected on Polish-Belarus border
  8. EU unveils common charger plan - forcing Apple redesign

Join EUobserver

Support quality EU news

Join us