Thursday

19th Apr 2018

Spanish bailout deal to be sealed amid protests

  • Mass protests erupted again in Spain after €65bn more cuts were announced (Photo: César Astudillo)

Eurozone finance ministers on Friday (20 July) are set to iron out the final details of bailout of up to €100bn for the Spanish banking sector, just as tens of thousands Spaniards took to the streets in protest against fresh spending cuts.

In a conference call set to start at 12.00 Brussels time, the 17 ministers are expected to sign off a memorandum of understanding with Spain, spelling out the conditions of the loan capped at €100 billion.

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.

The final amount still to be determined after a comprehensive audit of 14 Spanish banks, making up 90 percent of its banking sector, is carried out in September. A first tranche of up to €30 billion will be made available by the end of July to reassure markets that these are not empty promises.

A draft agreement that emerged ahead of a vote in the German Bundestag on Thursday approving the deal caused a bit of an uproar in Spain, with El Pais newspaper accusing the government of "hiding" the documents from public scrutiny.

The 70-page long document is expected to be broadly adopted as is on Friday and then signed by the Spanish government. It mostly relates to how banks sitting on bad loans will be assessed, recapitalised and possibly wound down, how the national banking supervisors have to be strengthened and transparency of banks balance sheets increased.

But it also refers to "regular and closely" monitoring of other economic reforms aimed at reducing the budget deficit to 3 percent of GDP by 2014.

Tax policies are also to be monitored, along with labour market reforms, with member states set to "review on a regular basis the economic policies implemented by Spain," in line with binding recommendations by the EU commission.

The government last week announced fresh public sector wage cuts and VAT hikes amounting to €65 billion, which on Thursday saw tens of thousand of people take to the streets all across the country. Riot police fired rubber bullets on protesters in Madrid, who set garbage bins on fire and threw explosive cocktails as tensions rose.

Unemployment is at 24 percent in Spain, while more than half of the country's youngsters are out of a job.

Prime Minister Mariano Rajoy defended the cuts as part of the bailout deal needed to rescue the bleeding banks. But markets seem unimpressed. At a debt auction on Thursday, Spain managed to borrow almost €3 billion from the markets, but at borrowing costs above seven percent - a threshold considered bailout territory.

According to the draft memorandum, in money that is unused for the banking rescue could be re-allocated to another bailout programme - for instance buying Spanish bonds. But for that to happen, a new deal would have to be approved by all eurozone countries and with likely even stricter conditions attached.

"The up to €100 billion, which the eurozone has undertaken to provide to Spanish banks is to do just that, it is only for that purpose and not for any other," an EU commission spokesman said Thursday.

Eurozone crisis worsens as Germany warned on top rating

The euro-crisis is accelerating as Spanish borrowing costs continue rising and Germany, the Netherlands and Luxembourg on Monday were warned they may lose their triple A rating due to "rising uncertainty."

News in Brief

  1. MEPs urge better protection for journalists
  2. Dieselgate: MEPs back greater role for EU in car approvals
  3. European parliament adopts new organic farming rules
  4. EU granted protection to half million people in 2017
  5. Report: Facebook to carve 1.5bn users out of EU privacy law
  6. Greek court ruling permits migrants to travel to mainland
  7. Commonwealth summit hopes for trade boost after Brexit
  8. Merkel and Macron meet to finetune eurozone reform plans

Stakeholders' Highlights

  1. ILGA EuropeParabéNs! Portugal Votes to Respect the Rights of Trans and Intersex People
  2. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  3. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  4. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  5. UNICEFCalls for the Protection of Children in the Gaza Strip
  6. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  7. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  8. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  9. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  10. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  11. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  12. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector

Latest News

  1. Obscurity surrounds EU military fund's expert groups
  2. New EU party finance rules short circuit accountability
  3. Draghi to stay in secretive 'lobby' group
  4. Bulgaria offers lesson in tackling radical-right populists
  5. Getting secret EU trilogue documents: a case study
  6. Selmayr case scars Parliament and Commission
  7. Beyond macho: Turkish-EU ties
  8. 'Flobert' guns - Europe's latest terror loophole