Monday

2nd May 2016

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.

News in Brief

  1. Delays as Brussels airport reopens terminal
  2. MEPs urge extra sanctions on Russian officials
  3. Poland's right-wing leader wants constitutional overhaul
  4. Don't silence media, Council of Europe tells countries
  5. Eurostat: 88,300 lone minors among refugees
  6. EU unemployment lowest in seven years
  7. Nord Stream II will undermine EU security, EPP leader says
  8. Brussels Airport reopens departure hall after attack

Stakeholders' Highlights

  1. European Music CouncilRegister Now for the 6th European Forum on Music in Wroclaw, European Capital of Culture 2016
  2. Belgrade Security ForumJoin Our Team for the 6th Belgrade Security Forum. Apply Now! Deadline May 20
  3. European Roundtable of IndustrialistsCompanies Make Progress on Number of Women in Leadership Roles
  4. Counter BalanceParliament Gets Tough on Control EU Bank's Funds
  5. ICRCSyria: Aleppo on the Brink of Humanitarian Disaster
  6. CESIWorld Day For Health and Safety at Work: Public Sector Workers in The Focus
  7. EFABasque Peace Process-Arnaldo Otegi Visits the European Parliament
  8. EscardioChina Pays Price of Western Lifestyle With Soaring Childhood Obesity
  9. Centre Maurits CoppetiersThe Existence of a State is a Question of Fact, Not a Question of Law
  10. Martens CentreJoin Us at The Event: Prospects For EU Enlargement After 2019
  11. ICRCSyria: Aid for Over 120,000 People Arrives in Besieged Town Near Homs
  12. Counter BalanceHighway to Hell: European Money Fuelling Controversial Infrastructure Projects