Spain bank bailout may be near

Soraya
MADRID -- Despite denials from Madrid, analysts increasingly expect Spain -- within weeks or even days -- to ask Europe for aid to prop up its deeply indebted banks and prevent them from worsening the continent's economic predicament.

Such a request would make Spain the fourth nation in the Eurozone to seek a bailout package since Europe's debt crisis hit more than two years ago.

Any aid plan is likely to fall short of the full-fledged bailouts given to Greece, Portugal and Ireland, which came with strict oversight by officials from the European Union and the International Monetary Fund. Spain is angling instead for a relatively small infusion of cash, possibly from Europe's temporary rescue fund, into its troubled banks, which are weighed down with bad mortgages and unpaid construction loans left over from the country's housing bubble.

Spain's own bank rescue fund, established in 2009, has slightly more than $6 billion left in it -- not enough to cover the $24-billion cost of bailing out the country's largest real-estate lender, Bankia, and at least four other banks. The fear is that without rapid European assistance, Spanish banks might drag their country into a full-fledged EU and IMF bailout.

Spanish officials said Friday that no bailout decision has been made and that the government will await reports from outside auditors who've been hired to assess how large a chunk of Spain's banking sector needs to be recapitalized.

"Once the estimates of the numbers are known with regard to what the financial sector might need, the government will state its position," Deputy Prime Minister Soraya Saenz de Santamaria told reporters after a weekly Cabinet meeting Friday. She said the results of two audits are due June 21.

The IMF has done its own evaluation, the results of which were due to be presented to Spanish officials Friday and made public Monday. Leaks have put the figure around $50 billion -- about half the size of the smallest bailout so far, for Portugal.

But the Fitch ratings agency, in a downgrade notice Thursday, said that up to $126 billion might be necessary to bolster Spanish banks. Fitch downgraded Spain's debt rating by three notches, down to just two grades above junk status.

ALSO:

Bus explosion kills 19 in northwest Pakistan

U.N. debates alternatives to failed Syria peace plan

Afghanistan jailbreak frees more than a dozen, including Taliban

-- Lauren Frayer

Photo: Soraya Saenz de Santamaria, the Spanish deputy premier, speaks to reporters Friday after a Cabinet meeting. Credit: Emilio Naranjo / EPA

 
Comments () | Archives (0)

Connect

Recommended on Facebook


Advertisement

Times Global Bureaus ยป

Click on bureau location to view articles

In Case You Missed It...

Video

Recent Posts

Archives
 



Archives
 

In Case You Missed It...