Saturday

20th Aug 2022

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.

News in Brief

  1. China joins Russian military exercises in Vostok
  2. Ukraine nuclear plant damage would be 'suicide', says UN chief
  3. Denmark to invest €5.5bn in new warships
  4. German economy stagnates, finance ministry says
  5. Syria received stolen grain, says Ukraine envoy
  6. Truss still leads in next UK PM polling
  7. UN chief meets Zelensky and Erdogan over grain exports
  8. Fighting stalls ahead of UN visit, Ukraine says

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  2. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  3. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  4. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022
  5. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  6. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis

Latest News

  1. European inflation hits 25-year high, driven by energy spike
  2. No breakthrough in EU-hosted Kosovo/Serbia talks
  3. Letter to the Editor: Rosatom responds on Zaporizhzhia
  4. Could the central Asian 'stan' states turn away from Moscow?
  5. Serbia expects difficult talks with Kosovo at EU meeting
  6. How scary is threat to Ukraine's Zaporizhzhia nuclear plant?
  7. Slovakia's government stares into the abyss
  8. Finland restricts Russian tourist visas

Join EUobserver

Support quality EU news

Join us