MADRID - Europe is to offer Spain a bailout package of up to 100billion ($125 billion) to help rescue the country's banks and keepthe 17-country eurozone from breaking apart. After months of fierce denials, Spain admitted it would tap thefund as it moved faster than expected to stem the economic crisisthat has ravaged Europe for two years. Spain becomes the fourth - and largest - European economy to askfor help and its admission of help comes after months of marketconcern about its ability to pay its way. In recent weeks investorshave demanded higher and higher costs to lend to Spain, and itbecame clear it would be just too expensive for the country toborrow the money necessary for a bank rescue from the markets.
The three countries that have received rescues thus far Greece,Ireland and Portugal are fairly small, and many have worriedthat bailing out much-larger Spain could call the entire europroject into question. Cyprus, also a small economy, could also beforced to seek a bailout soon. Economy Minister Luis de Guindos said Saturday the aid will go tothe banking sector only and so would not come with new austerityconditions attached for the economy in general conditions thathave been an integral part of previous bailouts to Portugal,Ireland and Greece. A statement from the finance ministers of the 17 countries that usethe euro explained that the money would be fed directly into a fundSpain set up to recapitalize its banks, but underscored that theSpanish government is ultimately responsible for the loan. Still, that plan allows Spain to avoid making the onerouscommitments that Greece, Ireland and Portugal were forced to whenthey sought their rescues.
Instead, the eurogroup statement saidthat it expected Spain's banking sector to implement reforms andthat Spain would be held to its previous commitments to reform itslabour market and manage its deficit. The exact figure of the bailout, however, has not yet been decided.De Guindos said the country is waiting until independent audits ofthe country's banking sector have been carried out before askingfor a specific amount. The audits are expected June 21 at thelatest. De Guindos did say, however, that Spain would request enough moneyfor recapitalization, plus a safety margin that will be"significant." The eurogroup statement said that meant the costcould reach 100 billion. HD720p Portable Dvr Car Camera
The aid package was announced after avideo conference of euro zone finance ministers. With markets in turmoil, de Guindos said the government's effortsto shore up the financial sector "must be completed with thenecessary resources to finance the needs of recapitalization." "Therefore, the Spanish government states its intention to requestEuropean financing for the recapitalization of banks that need it,"the minister told a press conference after a videoconference withcolleagues from the eurozone. The Spanish acceptance of aid for its banks is a big embarrassmentfor Prime Minister Mariano Rajoy, who insisted just 10 days agothat the banking sector would not need a bailout. For him andofficials of his government, that had become something of a mantra.He was elected in November and walked right into a hurricane. International pressure on Spain to solve its financial problems hasbeen growing in recent weeks. HD720P Vehicle Car Camera
On Thursday ratings agency Fitch hitSpain with a three-notch downgrade of its credit rating. That leftit two levels above junk status. Then on Friday, Moody's InvestorServices warned it could downgrade Spain and other countries in theeurozone. In the early hours of Saturday, the International Monetary Fundreleased a report estimating that Spanish banks need arecapitalization injection of at least 40 billion ($50 billion)following a stress test it performed on the country's financialsector. That report came out three days ahead of schedule,underscoring the urgency of the situation. 1080P Car Black Box Manufacturer
U.S. President Barack Obama, facing re-election, enduring a weakeconomy and in need of strong trading partners, expressed concernlate Friday over the European economic crisis. U.S Treasury secretary Timothy Geithner welcomed Spain's decisionand the offer of European support, describing them as "importantfor the health of Spain's economy and as concrete steps on the pathto financial union, which is vital to the resilience of the euroarea." French Finance Minister Pierre Moscovici said the deal would"contribute to restoring confidence in the eurozone." "The accord announced tonight speaks to a reinforced solidary amongthe countries of the eurozone and to their resolute desire toensure its stability," he said in a statement. Some of Spain's banks are struggling with by toxic real estateloans and assets. The Bank of Spain says they total around 180billion.
Nationalized lender Bankia, SA, which has requested 19billion in aid, has 32 billion in toxic assets. Around four otherbanks are considered prime candidates for bailouts. De Guindos saidSaturday the sector is largely solid and the euro zone package willbe funnel toward only about 30 per cent of it. Analyst Rafael Pampillon if IE Business School in Madrid said thebailout addressed the uncertainty the markets had felt about howSpain's debt-laden banking sector would recapitalize.
"This uncertainty, and hence the panic, will slowly dissipate fromthe markets," he said. Pampillon added that with polls forecastinga pro-Euro victory in Greek elections, markets would be furtherrelieved because the austerity conditions imposed on Greece wouldmost likely be fulfilled. Moody's said Spain's banking problem is largely confined to thatcountry and not likely to spill over to other eurozone nations,with the exception of Italy where the European Central Bank hasalready stepped in to buy government bonds as a way to help lowerthe country's borrowing costs. Spain has been criticized for being too slow to set out a roadmapto resolve its problem.
European business leaders and analysts havestressed that Spain must find a solution quickly so that it is notcaught up in any market turmoil sparked by the Greek elections onJune 17. There are concerns that anti-bailout left-wing partySyriza could become the largest party in the Greek parliament,putting the country's membership in the eurozone at risk. But others said it's more important for Spain to correctly assesshow to shore up its banking system than it is to hurry into abailout ahead of the Greek elections. If Spain doesn't get a request for outside help right the firsttime, "then you are in second bailout territory," said Mark Miller,an analyst with Capital Economics in London. Working in Spain's favour is the fact that its public debt isactually quite low, at 68.5 per cent of its gross domestic productat the end of 2011.
Its debt is predicted to hit 78 per cent by the end of the year,but even that figure would be below the debt-to-GDP ratios ofEurope's strongest economy, Germany, which is at 82 per cent. But Spain's in its second recession in three years, withunemployment at nearly 25 per cent and little hope for improvementthis year. Prime Minister Mariano Rajoy's government has imposed awave of austerity measures since he took office in December thathave raised taxes, made it cheaper to hire and fire workers and cutgovernment funding for education and health care. ___ DiLorenzo reported from Paris. Associated Press writers JuergenBaetz in Berlin, Slobodan Lekic in Brussels, and Alan Clendenningand Harold Heckle in Madrid contributed to this report.
The three countries that have received rescues thus far Greece,Ireland and Portugal are fairly small, and many have worriedthat bailing out much-larger Spain could call the entire europroject into question. Cyprus, also a small economy, could also beforced to seek a bailout soon. Economy Minister Luis de Guindos said Saturday the aid will go tothe banking sector only and so would not come with new austerityconditions attached for the economy in general conditions thathave been an integral part of previous bailouts to Portugal,Ireland and Greece. A statement from the finance ministers of the 17 countries that usethe euro explained that the money would be fed directly into a fundSpain set up to recapitalize its banks, but underscored that theSpanish government is ultimately responsible for the loan. Still, that plan allows Spain to avoid making the onerouscommitments that Greece, Ireland and Portugal were forced to whenthey sought their rescues.
Instead, the eurogroup statement saidthat it expected Spain's banking sector to implement reforms andthat Spain would be held to its previous commitments to reform itslabour market and manage its deficit. The exact figure of the bailout, however, has not yet been decided.De Guindos said the country is waiting until independent audits ofthe country's banking sector have been carried out before askingfor a specific amount. The audits are expected June 21 at thelatest. De Guindos did say, however, that Spain would request enough moneyfor recapitalization, plus a safety margin that will be"significant." The eurogroup statement said that meant the costcould reach 100 billion. HD720p Portable Dvr Car Camera
The aid package was announced after avideo conference of euro zone finance ministers. With markets in turmoil, de Guindos said the government's effortsto shore up the financial sector "must be completed with thenecessary resources to finance the needs of recapitalization." "Therefore, the Spanish government states its intention to requestEuropean financing for the recapitalization of banks that need it,"the minister told a press conference after a videoconference withcolleagues from the eurozone. The Spanish acceptance of aid for its banks is a big embarrassmentfor Prime Minister Mariano Rajoy, who insisted just 10 days agothat the banking sector would not need a bailout. For him andofficials of his government, that had become something of a mantra.He was elected in November and walked right into a hurricane. International pressure on Spain to solve its financial problems hasbeen growing in recent weeks. HD720P Vehicle Car Camera
On Thursday ratings agency Fitch hitSpain with a three-notch downgrade of its credit rating. That leftit two levels above junk status. Then on Friday, Moody's InvestorServices warned it could downgrade Spain and other countries in theeurozone. In the early hours of Saturday, the International Monetary Fundreleased a report estimating that Spanish banks need arecapitalization injection of at least 40 billion ($50 billion)following a stress test it performed on the country's financialsector. That report came out three days ahead of schedule,underscoring the urgency of the situation. 1080P Car Black Box Manufacturer
U.S. President Barack Obama, facing re-election, enduring a weakeconomy and in need of strong trading partners, expressed concernlate Friday over the European economic crisis. U.S Treasury secretary Timothy Geithner welcomed Spain's decisionand the offer of European support, describing them as "importantfor the health of Spain's economy and as concrete steps on the pathto financial union, which is vital to the resilience of the euroarea." French Finance Minister Pierre Moscovici said the deal would"contribute to restoring confidence in the eurozone." "The accord announced tonight speaks to a reinforced solidary amongthe countries of the eurozone and to their resolute desire toensure its stability," he said in a statement. Some of Spain's banks are struggling with by toxic real estateloans and assets. The Bank of Spain says they total around 180billion.
Nationalized lender Bankia, SA, which has requested 19billion in aid, has 32 billion in toxic assets. Around four otherbanks are considered prime candidates for bailouts. De Guindos saidSaturday the sector is largely solid and the euro zone package willbe funnel toward only about 30 per cent of it. Analyst Rafael Pampillon if IE Business School in Madrid said thebailout addressed the uncertainty the markets had felt about howSpain's debt-laden banking sector would recapitalize.
"This uncertainty, and hence the panic, will slowly dissipate fromthe markets," he said. Pampillon added that with polls forecastinga pro-Euro victory in Greek elections, markets would be furtherrelieved because the austerity conditions imposed on Greece wouldmost likely be fulfilled. Moody's said Spain's banking problem is largely confined to thatcountry and not likely to spill over to other eurozone nations,with the exception of Italy where the European Central Bank hasalready stepped in to buy government bonds as a way to help lowerthe country's borrowing costs. Spain has been criticized for being too slow to set out a roadmapto resolve its problem.
European business leaders and analysts havestressed that Spain must find a solution quickly so that it is notcaught up in any market turmoil sparked by the Greek elections onJune 17. There are concerns that anti-bailout left-wing partySyriza could become the largest party in the Greek parliament,putting the country's membership in the eurozone at risk. But others said it's more important for Spain to correctly assesshow to shore up its banking system than it is to hurry into abailout ahead of the Greek elections. If Spain doesn't get a request for outside help right the firsttime, "then you are in second bailout territory," said Mark Miller,an analyst with Capital Economics in London. Working in Spain's favour is the fact that its public debt isactually quite low, at 68.5 per cent of its gross domestic productat the end of 2011.
Its debt is predicted to hit 78 per cent by the end of the year,but even that figure would be below the debt-to-GDP ratios ofEurope's strongest economy, Germany, which is at 82 per cent. But Spain's in its second recession in three years, withunemployment at nearly 25 per cent and little hope for improvementthis year. Prime Minister Mariano Rajoy's government has imposed awave of austerity measures since he took office in December thathave raised taxes, made it cheaper to hire and fire workers and cutgovernment funding for education and health care. ___ DiLorenzo reported from Paris. Associated Press writers JuergenBaetz in Berlin, Slobodan Lekic in Brussels, and Alan Clendenningand Harold Heckle in Madrid contributed to this report.