June 19, 2013
Spain asks for euro zone aid to recapitalise banks
Spain formally requested euro zone rescue loans to recapitalise its debt-laden banks today as the euro and shares fell on investor scepticism about this week's EU summit.
Spanish Economy Minister Luis de Guindos asked for up to 100 billion euros (80.34 billion pounds) in a letter to Eurogroup chairman Jean-Claude Juncker, saying the final amount of financial assistance would be set at a later stage.
He confirmed his intention to sign a Memorandum of Understanding for the package by July 9 and said the amount should be enough to cover all banks' needs, plus an additional security buffer.
The rescue, agreed on June 9, is intended to help Spanish lenders recover from the effects of a burst real estate bubble and a recession, which have piled up bad loans and sinking property portfolios.
Two independent audits last week put the Spanish banks' capital needs in a stressed scenario at up to 62 billion euros, and a full audit will be delivered in September.
A working document prepared by top European Union officials calls for the gradual introduction of a banking union, starting with supervisory power for the European Central Bank and developing a deposit guarantee scheme based on pooling national systems, with a levy-funded bank resolution fund.
The euro zone has set up two rescue funds to try to contain the crisis, the temporary EFSF and the permanent ESM, due to come into force next month, but markets have so far judged that they contain too little money and their governance is too inflexibly to be effective.