Spain formally requests a bailout loan

PanARMENIAN.Net - Spain has formally requested a bailout loan for its banking sector from its eurozone partners, who agreed to lend up to 100bn euros ($125bn; £80bn), BBC News reported.

No specific figures were given for the emergency loans, although independent audits last week said that the banks would need up to 62bn euros to stabilize themselves. But Spain's economy ministry said that the audits, and a report from the IMF, should be a starting point.

The request was made in a letter from Spain's economy minister Luis De Guindos to Eurogroup chairman Jean-Claude Juncker. The letter said that Spain planned to sign a memorandum of understanding for the package by July 9, which would include details such as exactly how much would be borrowed. It said the amount would be enough to cover all the needs of its banks and an additional security buffer.

Olli Rehn, European commissioner for economic and monetary affairs welcomed the request from Spain. In a statement, he said: "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."

He added that his staff were working on the conditions that would be applied to the loans, including conditions for the banks and for the supervision and regulation of the whole banking sector.

He also said that he expected Spain to work to make its public finances sustainable and bring down its deficit. "There cannot be sustainable growth without sustainable public finances, both at national and sub-national levels," he said. "Progress in these areas will be closely and regularly reviewed in parallel to the financial assistance."

The problems facing Europe's banks will be on the agenda at the summit of European leaders on June 28 and 29.

According to draft documents prepared for the meeting, which have been reported by news agencies, delegates will be discussing specific proposals for a European banking union.

The proposals include having a single European banking supervisor and a common scheme for guaranteeing bank deposits.

There would also be a central fund to wind down bad banks.

Options for the regulator include having one body, possibly the European Central Bank, to oversee the continent's biggest banks, while another watchdog supervises the day-to-day operations of all the banks.

The proposals also include closer fiscal union, with the prospect of eurozone countries sharing debt raised again.

The idea of common debt is favored by many eurozone countries, but opposed by German Chancellor Angela Merkel.