Spain needs no 'sovereign bailout'

German finance minister Wolfgang Schäuble said today that Spain did not need a sovereign bailout on top of the package already agreed for its banks because it was on the right path to regain the confidence of markets.

"Spain needs no programme because it is doing the right thing and will be successful," he told foreign correspondents in Berlin.

"What Spain needs is the confidence of financial markets and that is where Spain has real problems."

Mr Schäuble dismissed as "dangerous" the idea of giving Spain the full €100 billion earmarked for the recapitalisation of its banks if it needs less than that amount.

Regarding Greece, the minister said nobody in the euro zone wanted it to leave the currency bloc but Athens had to prove to the "troika" of international inspectors that it was sticking to the terms of its second international rescue package.

Stressing that it had been "very difficult" to convince European leaders to give Greece another bailout, Mr Schäuble said: "Nobody wants Greece to leave the euro, but the question is whether it has met the conditions of its second aid programme."

His comments on the back indications that Spain's banking sector will likely reveal capital needs of €50 billion to €60 billion.

Spain became the latest focus point earlier this year of the euro zone debt crisis after it became clear its banks would need financial support to clean up their balance sheets of around €185 billion of toxic real estate assets.

Sources told Reuters news agency the Bank of Spain had started to communicate to the banks the results of the stress tests earlier yesterday and that all of them would be informed by Monday. This latest figure, which is in line with preliminary estimates released in June, will now be used to determine how much of the €100 billion zone credit line available to Spain is needed to recapitalise its lenders.

The results of the tests will be published on September 28th.

The country, which sought the euro zone lifeline for its lenders in June, is now hesitating to request an aid programme which would trigger a bond-buying programme from the European Central Bank.

"We'll know in the next few days, in a week. We'll get a figure of around €70, €75 or €80 billion," BBVA's chairman Francisco Gonzalez said at an event in Madrid.

Mr Gonzalez explained the €80 billion figure included around €20 billion already allocated to troubled banks, meaning the final figure would be between €50 billion and €60 billion.

A spokeswoman for the economy ministry said such a figure would be in line with economy minister Luis de Guindos' own expectations, although she said the amount Spain taps from EU funds would be lower.

She explained that the final bill would be reduced because some lenders would manage to find capital on their own on the market, holders of hybrid capital instruments would have to take a haircut on their investments and assets would be transferred to the so-called "bad bank" the government is setting up to park and later sell off toxic assets.

Mr Gonzalez also said his bank was considering transferring assets to the new structure as well as taking a stake but had not made a final decision on both issues. He also said that foreign investors would not rush into investing in the "bad bank".

"We're open to transferring assets or injecting capital (in the asset management company), do whatever is good for our country," Mr Gonzalez told a group of business leaders. "But we need to be realistic. Today, international investors will not participate easily."

Banking sources expect the result of the stress test to trigger a new round of takeovers and mergers in Spain's banking sector, which shrank from more than 40 banks before the crisis to just 14 today.

Mr Gonzalez said he expected this number to fall to 10 within a year and that BBVA stood ready to buy other smaller lenders. "In a first phase, there will be 10 entities, two big banks, two or three medium-sized and four or five small ones," he said.

Reuters