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Spain asks for financial help to support its banking system

10 June 2012 00:57 (UTC +04:00)

Baku-APA. Spain will ask eurozone partners for financial help to support its banking sector, Economy Minister Luis De Guindos told a press conference here on Saturday, APA reports quoting Xinhua.

De Guindos assured that there will be enough money, with a "significant margin", for financial entities to cover their capital needs, which were identified by the International Monetary Fund (IMF).

The entities could ask for financial aid to the Fund for Orderly Bank Restructuring (FOBR), the entity that would receive the European money.

This means, FOBR will act as an intermediary of the government. It will also be the final organism to receive the European funds, a fact that will increase levels of the Spanish debt.

All of this will allow entities to give credits to companies and families.

According to the latest report, the Eurogroup will give Spain a bailout up to 100 billion euros (about 125 billion U.S. dollars).

The Spanish government will request European financial support for its banks and the countries from the eurozone will accept this request, according to eurozone sources.

De Guindos explained that the Eurogroup have agreed on giving the Spanish banking system a bailout up to 100 billion euros. This bailout does not have any conditions regarding economic policy.

This support will not impose any conditions on macroeconomic policy but Spain’s banks will have to be reorganized, reported the same sources. In short, Spain has taken the final decision to receive a bailout that will allow the country to reorganize its weak financial system.

Meanwhile, Eurozone finance ministers confirmed on Saturday that the single-currency area is ready to offer up to 100 billion euros in financial aid to rescue Spain’s ailing banking sector, Eurogroup said in a statement.

"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," the Eurogroup said in a statement on the European Commission’s website after an emergency conference call of finance ministers.

"The financial assistance would be provided by the EFSF/ESM for recapitalization of financial institutions," the Eurogroup added.

The Eurogroup also confirmed that it has been informed that "the Spanish authorities will present a formal request shortly" and the euro area "is willing to respond favourably to such a request."