Cyprus caught in full bailout programme, Spain gets bank rescue
By Sarah Collins | Wednesday 27 June 2012
Cyprus will face a full EU-IMF bailout programme to steady its faltering economy, eurozone finance ministers said, on 27 June, as Spain was granted a bank-specific bailout. Cyprus became the fifth eurozone country to apply for aid this week on the back of a lack of market access and the damage inflicted on its banking sector by a Greek debt writedown earlier this year. “Based on a needs assessment, the euro area financial support would be provided in the framework of a comprehensive adjustment programme, building on the measures already taken by the Cypriot authorities and the recommendations put forward by the European Commission,” ministers said in a statement after an emergency teleconference, on 27 June.
Cyprus had hoped to confine the rescue to its banking sector, a move that was confirmed for Spain during the same conference call. Ministers said Spain’s bailout, which could amount to up to €100 billion, which will be channelled to the banking sector via the Spanish government’s Fund for Orderly Bank Restructuring but will be added to the government’s debt. The money will come from the European Financial Stability Facility until the European Stability Mechanism is up and running. “The eligibility conditions for access to an EFSF-ESM financial assistance for the re-capitalisation of financial institutions are satisfied,” ministers said. While the terms of the aid relate to bank restructuring and supervision, ministers insisted that Spain honour its deficit reduction commitments under the Stability and Growth Pact and keep up public sector, labour and housing market reforms as promised under a separate procedure that monitors imbalances. The news comes as Spain announced it had already exceeded its 2012 deficit target in the first five months of the year.