IMF to put Spanish bailout bill at 40-80 billion euros

An IMF report on Spanish banks to be released on Monday would estimate the cost of refinancing them at between $40-80 billion euros, according to a Spanish newspaper.

The International Monetary Fund has set out two scenarios, according to a source quoted by ABC newspaper who it said had reviewed a draft of the document.

One estimate, based on the current situation in Spain, says 40 billion euros would cover the refinancing needs of the 10 banks including Bankia, which Madrid plans to rescue with an historic bail-out worth 23 billion euros.

The second, 80-billion-euro scenario addresses the possibility of a severe Spanish recession that would require a rescue of the entire banking sector. But sources told ABC that this nightmare scenario was considered "unreal."

Spanish authorities have given themselves two weeks to take a decision on how to recapitalise weakened banks, which might require Madrid appealing for international financial aid, Finance Minister Luis de Guindos said.

Bankia's request for much more state aid than initially expected has raised tension on financial markets because analysts are not sure Madrid can afford a broad restructuring of the country's banking sector by itself.

Spanish officials insist however that the country will not have to follow Greece, Ireland and Portugal in asking for aid from the European Union and IMF, which would put Madrid's finances under tight international scrutiny.

Spain still needs to refinance about 82 billion euros of debt this year, while helping its regions to repay maturing debts of about 16 billions euros in the second half of 2012. Montoro said he did not expect the bill to recapitalize Spanish banks to be too large.

Spain is pressing for a direct European rescue for its banks, without the government having to ask for help, but Germany has appeared to rule out such a "bailout lite" for the euro zone's fourth biggest member.

The Treasury, which took advantage of favorable funding conditions in the first months of the year after the ECB injected about 1 trillion euros of cheap money into European banks, holds 44 billion euros in cash and can meet its financial obligations for a few months. This strong liquidity position could dwindle quickly if market sentiment gets worse and the bill to recapitalize troubled banks soars further.

The government o Mariano Rajoy is set to inject 19 billion euros in to nationalized lender Bankia and will soon get the results of an independent audit of its banking sector which will determine how much more is needed for other banks.