Spain appeals for EU bail-out of struggling banks

Spain's budget minister has during a radio interview appealed for an EU bail-out of the country's banks.Speaking on Tuesday (5 June) on the Onda Cero radio station, Cristobal Montoro said: "Europe should move swiftly to allow its institutions to directly boost the capital of troubled banks in Spain." He added: "The amount needed by Spain's banking system isn't very high, nor excessive. What matters is the procedure to provide such an amount - and that's why it is important that European institutions open up and proceed with this."

His reference to "direct" aid to banks is an appeal for the Union to use its Luxembourg-based EFSF bail-out fund to help Spanish lenders. The alternative - a bail-out of the Spanish state involving the EFSF and the International Monetary Fund (IMF), as in Greece, Ireland and Portugal - comes with outside supervision of national finances and would increase the country's budget deficit. He said Spain can no longer borrow money from markets due to loss of confidence which has seen borrowing costs shoot up compared to Germany. (...)

The cost of a Spanish bank rescue is being estimated at between €40 billion and €90 billion. Montero added that a full-blown EU-IMF bail-out is unfeasible because the EFSF has €440 billion in the pot, while Spain, the eurozone's fourth largest economy, owes foreign lenders almost €1 trillion. (...)

The Spanish cry got a sympathetic ear in France.French foreign minister Laurent Fabius told media while visiting Rome also on Tuesday that the EU should take a flexible approach to Madrid.

Volker Kauder, the chief whip of Chancellor Angela Merkel's Christian Democratic Union party, told the ARD TV station on Wednesday morning: (...) "Germany will demonstrate its solidarity with other states in Europe ... but the states of Europe must for their part undertake every endeavour to contribute to solving those problems themselves." The European Commission will on Wednesday propose plans for an EU "banking union" to prevent a Spanish-type scenario in years to come. 

Euobserver