Wednesday

22nd Feb 2017

Euro-ministers agree outline for Spanish bank bailout

  • Jean-Claude Juncker - to remain as eurogroup chief for another six months (Photo: consilium.europa.eu)

Eurozone finance ministers late on Monday evening (9 July) agreed the broad outline of a bank bailout for Spain, with €30 billion to be made available by the end of the month.

The "political understanding" is to be formally agreed by 20 July - after going through necessary parliamentary ratification - with Spain's banking sector to go through an "overhaul" in return.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"We are convinced this conditionality will succeed in addressing the remaining weakness in the Spanish banking sector," Eurogroup chief Jean-Claude Juncker said. Each bank that receives money must undergo specific reforms.

The full amount needed for Spain's troubled banks is expected to be around €100 billion, but this will only become clear once a banking stress test is completed in September.

Spain was also given an extra year, until 2014, to bring its budget deficit to the 3 percent ceiling required by EU rules. It is expected to reduce its budget to 6.3 percent this year, to 4.5 percent in 2013 and to 2.8 percent a year later.

"This is a challenging but achievable objective," said EU monetary affairs commissioner Olli Rehn, who noted that Madrid will have to commit to the "rapid adoption of additional measures."

More generally, the Eurogroup leaders sought to clarify the confusion surrounding the deal struck at last month's EU summit.

"There will be no sovereign guarantee required," said Thomas Wieser, an Austrian official who chairs the working group which prepares Eurogroup events, referring to whether governments would have to underwrite loans from eurozone funds to their banks.

But this direct bank recapitalisation - seen as a key agreement of the June summit and essential for not putting indebted states, such as Spain, further into the red - will only take place once a single banking supervisory system for the eurozone is in place.

The European Commission is to come with proposals on this by September, with member states meant to try and find an agreement by the end of 2012.

"There are still differences over this. The details will be worked out by the end of the year," said Dutch finance minister Jan Kees de Jager.

This raises questions about whether the Spain will be able to avail itself of direct recapitalisation plans if it needs money straight away.

"As far as we are concerned, we will argue for retroactivity," said French finance minister Pierre Moscovici

The meeting also saw Ireland get a longed-for promise that for some sort of bank debt relief.

Rehn said the commission will look at the "sustainability" of Dublin's programme, with Ireland struggling to carry over €60 billion of banking debt. A proposal is to be made in September with an agreement expected the following month.

The lengthy meeting also saw a number of personnel appointments.

Juncker will stay on as head of the Eurogroup for a further six months before stepping down. The final two years of the mandate is likely to be then shared between Germany's Wolfgang Schauble and France's Moscovici.

Meanwhile, Luxembourg central banker Yves Mersch was nominated for a place on board of the European Central Bank. The head of the temporary EU bailout fund, German economist Klaus Regling, was chosen to head its permanent successor, the European Stability Mechanism.

IMF tells eurozone to turn on printing presses

The euro crisis continues to weigh down the global economy, the International Monetary Fund said Monday, putting pressure on the European Central Bank to lower its interest rate even further and issue more cheap loans to the banks.

Greece and creditors break bailout deadlock

Athens agreed on budget cuts worth up to €3.6 billion and extracted some concessions from creditors, but the IMF warned the package might not be enough.

MEPs approve Canada trade deal amid protest

Amid protests in front of the European Parliament's Strasbourg building and after heated debate among MEPs, the landmark trade deal with Canada was approved with a comfortable majority.

News in Brief

  1. Romanian parliament buries controversial corruption decree
  2. Dozens drown off Libyan coast
  3. EU ministers approve anti-tax avoidance directive
  4. Poland rejects EU criticism of court changes
  5. German nationalist leader met with Putin allies in Moscow
  6. German housing market overheated, says Bundesbank
  7. France invites three EU leaders for Versailles summit in March
  8. Greece agrees on new bailout reforms

Stakeholders' Highlights

  1. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  2. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  3. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  4. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  5. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  6. Centre Maurits CoppietersMinorities and Migrations
  7. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  8. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  9. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  10. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  11. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  12. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"