Europe Bailout Of Spain Could Cost $125 Billion
MADRID (AP) â Spain became the fourth and largest country Saturday to ask Europe to rescue its failing banks, a bailout of up to â¬100 billion ($125 billion) that leaders hoped would stabilize a financial crisis that threatens to break apart the 17-country eurozone.
The rescue offer follows growing pressure from international investors and the Obama administration and comes a week before elections in Greece, whose voters could decide whether the country leaves the euro.
Europe's widening recession and financial crisis has hurt companies and investors around the world. Providing a financial lifeline to Spanish banks is likely to relieve anxiety on the Spanish economy â which is five times larger than Greece's â and on markets concerned about the country's ability to pay its way.
"What the markets are looking for is essentially the Spanish government's acceptance that its banks are broke," said Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington.
Economy Minister Luis de Guindos announced the deal after an emergency conference call with eurozone financial leaders. He said the aid will go to the banking sector only and would not come with new austerity conditions attached for the economy in general â conditions that have been an integral part of previous bailouts to Portugal, Ireland and Greece.
The exact figure of the bailout has not yet been decided. De Guindos said the country is waiting until independent audits of the country's banking sector have been carried out before asking for a specific amount. The audits are expected June 21 at the latest.
De Guindos did say, however, that Spain would request enough money for recapitalization, plus a safety margin that will be "significant."
With markets in turmoil, de Guindos said the government's efforts to shore up the financial sector "must be completed with the necessary resources to finance the needs of recapitalization."
Finance ministers of the 17 countries that use the euro said the money would be fed directly into a fund Spain set up to recapitalize its banks, but underscored that the Spanish government is ultimately responsible for the loan.