Spain eyes loan of US$125b for banks
Source: Agencies |
June 26, 2012, Tuesday
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Print Edition
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SPAIN has made a formal request for a loan to help clean up its troubled banking sector, Economy Minister Luis de Guindos said yesterday.
However, the country has yet to specify how much of the 100 billion-euro (US$125.39 billion) loan package offered by the 17 countries that use the euro it will ask for. De Guindos said the figure will be made known on July 9 when Spain and its single currency partners reach agreement on the terms of the loan, such as the interest rate.
Last week, two international audits commissioned the government said that Spain's banks could need up to 62 billion euros to survive if the economy were to suffer an extreme deterioration.
Spain earlier this month finally admitted some of its banks were in severe trouble owing to the build-up of toxic assets after the collapse of the country's bloated real estate sector after 2008.
The letter to the eurozone governments requesting the loan said the amount sought "would be sufficient to cover capital necessities as well as an additional margin of security up to a maximum of 100 billion (euros)."
It was sent to Jean-Claude Juncker, the Luxembourg Prime Minister who is also president of the euro group of finance ministers.
Spain would like the loans to go directly to the banks, rather than have the government be responsible for repayment. While organizations such as the International Monetary Fund support this procedure, others such as fellow eurozone country Germany have ruled it out. Berlin insists on abiding by current regulations under which the money must be given to a government, adding to its debt pile.
"The question of whether the money will go directly to the banks or to the state is still open," Spanish Foreign Minister Jose Manuel Garcia-Margallo said.
In yesterday's letter, de Guindos said the aid would be channeled through Spain's state-run bank bailout fund.
Garcia-Margallo said Spain would seek the longest period possible for repayment and the lowest interest rate. De Guindos last week estimated the rate could be around 3-4 percent.
Investors worry the government may not get the money back from the banks and would have to repay the loans itself.
However, the country has yet to specify how much of the 100 billion-euro (US$125.39 billion) loan package offered by the 17 countries that use the euro it will ask for. De Guindos said the figure will be made known on July 9 when Spain and its single currency partners reach agreement on the terms of the loan, such as the interest rate.
Last week, two international audits commissioned the government said that Spain's banks could need up to 62 billion euros to survive if the economy were to suffer an extreme deterioration.
Spain earlier this month finally admitted some of its banks were in severe trouble owing to the build-up of toxic assets after the collapse of the country's bloated real estate sector after 2008.
The letter to the eurozone governments requesting the loan said the amount sought "would be sufficient to cover capital necessities as well as an additional margin of security up to a maximum of 100 billion (euros)."
It was sent to Jean-Claude Juncker, the Luxembourg Prime Minister who is also president of the euro group of finance ministers.
Spain would like the loans to go directly to the banks, rather than have the government be responsible for repayment. While organizations such as the International Monetary Fund support this procedure, others such as fellow eurozone country Germany have ruled it out. Berlin insists on abiding by current regulations under which the money must be given to a government, adding to its debt pile.
"The question of whether the money will go directly to the banks or to the state is still open," Spanish Foreign Minister Jose Manuel Garcia-Margallo said.
In yesterday's letter, de Guindos said the aid would be channeled through Spain's state-run bank bailout fund.
Garcia-Margallo said Spain would seek the longest period possible for repayment and the lowest interest rate. De Guindos last week estimated the rate could be around 3-4 percent.
Investors worry the government may not get the money back from the banks and would have to repay the loans itself.
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