Ministers to hold teleconference on Spain
By Sarah Collins | Tuesday 17 July 2012
Eurozone finance ministers are to hold a special meeting over the telephone, on 20 July, to formally approve the Spanish bank bailout. The news was confirmed, on 17 July, by the chair of the Eurogroup of finance ministers, Jean-Claude Juncker. In a statement, Juncker said the “only item on the agenda” was to be the agreement between Spain and the EU on the €100 billion loan for Spanish banks, known as the memorandum of understanding.
Spain appealed for the loan on 25 June after Bankia, the country’s fourth-largest bank, revealed it would need an extra €19 billion to comply with a government-imposed capital requirement to help guard against further losses in the real estate market. Eurozone finance ministers said, on 9 July, that they were prepared to lend up to €100 billion from the European Financial Stability Facility, the eurozone’s existing €440 billion bailout fund, specifically for Spain’s banks - a move that would have eaten up the remainder of the EFSF’s funds. The bailout will be transferred to the European Stability Mechanism as soon as it is up and running (not before September 12, pending a decision in Germany’s Constitutional Court), with the amount of the loan then taken off the Spanish government debt statistics.
However, German Chancellor Angela Merkel and her Finance Minister, Wolfgang Schäuble, have thrown the move into doubt, saying that the Spanish government will remain ultimately liable for the debt. The rescue loan is being given on condition that Spain restructures its banking sector, a move that the European Commission insists will not include forcing losses on senior bank bondholders, despite efforts by European Central Bank President Mario Draghi at a Eurogroup meeting last week to put the idea on the table.