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Ministers have approved a €100bn bailout for Spain's banks, while its premier Mariano continues an austerity agenda to close the government's deficit. Andres Kudacki/AP
Spain
No split between banks and sovereign - for now - as Spain secures bailout
The assistance – of up to €100 billion – comes with terms and conditions, while banks and the sovereign haven’t been split just yet.
EUROZONE FINANCE MINISTERS have formally agreed to a bailout of up to €100 billion for Spain’s banking sector – in a move which confirms that the Spanish taxpayer will still, for the time being, remain responsible for ensuring the loans are repaid.
In a statement this afternoon ministers said they had unanimously agreed to grant financial assistance, after the European Commission recommended providing a loan to recapitalise the national banks.
This, it added, was “warranted to safeguard financial stability in the euro area as a whole”.
Ministers said the terms and conditions applied to the loan would “of bank-specific measures”, including detailed plans for restructuring the plans and wider reforms of the banking sector.
“This conditionality will be enshrined in a Memorandum of Understanding that will be signed in the coming days,” it said.
The loans will be channelled through the Fund for Orderly Bank Restructuring (FOBR), a Spanish government agency, with the government formally retaining full responsibility for the financial assistance.
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This means that any proposal to split formally split the sovereign and banking sectors has not been brought to fruition for the time being, though the statement stops short of asserting that the payments will be added to Spain’s national debt.
From one fund to another
Funding will be drawn from the European Financial Stability Facility until the new permanent bailout fund, the European Stability Mechanism, is established – which is likely to formally occur on July 9.
Ministers asserted that neither fund will have preferred creditor status, a move which will encourage third party investors who would stand a greater chance of receiving at least some compensation if the banks were allowed to go to the wall.
The EFSF has set aside €30 billion to cater to institutions which need the recapitalisation as a matter of urgency.
“The Eurogroup is convinced that the reforms attached to this financial agreement will contribute to ensuring a return of all parts of the Spanish banking sector to soundness and stability,” ministers said.
The deal – reached through a teleconference of ministers this morning – comes the morning after widespread protests across Spain at a €65 billion package of government austerity measures announced by prime minister Mariano Rajoy.
Though the terms and conditions for the Spanish banking bailout will specifically apply to the banks and not to the government itself, Spain is still under an ‘excessive deficit procedure’ under which it is required to take action to bring its budget deficit within EU limits.
The cost of borrowing for the Spanish government this afternoon cleared the 7 per cent barrier, standing at 7.23 per cent for a 10-year loan.
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Madness. I only hope that the injustice of foisting such a debt on the taxpayer will galvanise their resolve to resist and in turn pave the way for a fairer solution than this, the most obscene fraud of the century.
And so continues the financial rape of Europe. The two Marios, Draghi and Monti, both of whom formally worked for Goldman Sachs, the investment bank responsible for bringing Greece to its knees, with their credit default swap bullshit – which allowed the former Greek government to hide the true extent of its debt, and usher in open season for rapacious financial speculators – are now in the Euro Zone driving seat. They, and the nefarious interests they represent, will bleed Europe dry. And that, my friends, includes us. So cheer up.
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