Spain to use €60bn of EU funds for bank rescue

SPAIN EXPECTS to use about €60 billion of the €100 billion on offer from the European Union for the bailout of its financial sector, the country’s economy minister has said.

Luis de Guindos believes the amount needed will be close to a €62 billion preliminary estimate that audit firm Oliver Wyman made in June.

The results of a more detailed audit on the capitalisation needs of Spain’s banks are expected in mid-September, he said in an interview with the International Herald Tribune.

Spain’s financial sector has been reeling in recent months, as the scale of the toxic assets created by the country’s burst real estate bubble has become apparent.

In May, the government part-nationalised Spain’s fourth-largest lender, Bankia, which the authorities said needed public funds of about €24 billion in order to stay afloat.

In June, the country requested from the EU a rescue package for the banking sector worth up to €100 billion.

The conservative government of Mariano Rajoy is implementing reforms to comply with the terms of that loan, which is still being finalised.

A financial sector reform due to be announced last Friday has been delayed for a week.

The financial crisis has added to Spain’s other economic woes, keeping its borrowing costs at unsustainable levels. There is growing speculation that the country will soon request another bailout, under which the European Central Bank would oversee the buying of Spanish sovereign debt on the secondary market.

Mr Guindos admitted that such action would be “an important helping hand”, adding: “we have to give reassurances to the ECB that we are going to meet our commitments”.

The next few weeks are likely to be key in Spain’s attempts to emerge from the euro zone debt crisis. The ECB is scheduled to discuss the issue of bond-buying when its governing council meets on September 6th.

On the same day, Mr Rajoy is due to meet with German chancellor Angela Merkel.

The economy is struggling to emerge from a double-dip recession and there was further bad news yesterday as the National Statistics Institute reported that GDP grew by only 0.4 per cent in 2011, rather than the previously announced 0.7 per cent.