Rehn Says Spain Bailout Conditions to Apply to Banks, Industry
European Union Economic and Monetary Affairs Commissioner Olli Rehn said the terms of a Spanish bailout package for its banking industry will include conditions for the individual banks recapitalized under the program and for the country’s financial industry as a whole.
Spain today formally requested rescue aid for its banks as it negotiated details of the program, including which European bailout facility would be used for the lifeline of as much as 100 billion euros ($125 billion). A memorandum of understanding will be finished before a meeting of euro-area finance chiefs on July 9, according to Spain’s Economy Ministry.
“Restructuring the banking sector is key to reinforce the confidence in the Spanish economy and to restore the conditions to proper access to credit by companies and households, thus for sustaining the recovery,” Rehn said in a statement posted on the European Commission’s website.
Spain agreed to the bailout after a conference call with euro-area finance chiefs on June 9. Spanish banks, still reeling from a real-estate slump now in its fifth year, may need as much as 62 billion euros to withstand a worst-case economic scenario, studies by two consulting firms hired by the government showed on June 21.
Luxembourg Prime Minister Jean-Claude Juncker, who leads the group of euro-area finance ministers, said he had received Spain’s aid application and would issue a formal response “in due course.”
The commission will now step up its work to assess the needs of Spain’s banks and to prepare a proposal on conditions to be attached to the aid in cooperation with the staff of the European Central Bank, the International Monetary Fund and the European Banking Authority, Rehn said.
“The capital requirements recently estimated by two private firms provide a good starting point for this work,” he said. “I am confident that we can conclude an agreement on the memorandum of understanding in a matter of weeks so that we can proceed with the restructuring effort.”
Rehn said he expects Spain “to keep the same determination and the momentum in the reforms that can bring sustainable growth and more and better jobs, as well as to honor its commitments under the excessive-deficit procedure.”
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