Spain finally asks for bailout and receives €100bn lifeline

Emergency meeting of finance ministers grants eurozone's fourth largest economy aid for its banks

After months of speculation, denials, and hoping for something – anything – to turn up, Spain has formally requested a bailout, by far the largest economy to do so. After an emergency telephone conference of eurozone finance ministers yesterday, an official statement was issued saying that the sum involved could be as large as €100bn.

Spain, whose banks are struggling with toxic property loans and assets, becomes the fourth member of the 17-nation eurozone to get a bailout since the continent's debt crisis erupted two years ago. In announcing the request, Luis de Guindos, economy minister, said the final figure was still in question and would remain so pending results of two independent audits of the banking sector, due by 21 June. But he insisted it would fully cover the needs of the country's banks, and not be followed by a request for further funds.

The minister was also at pains to stress that no further austerity measures would be attached as conditions for receiving the funds, which would be used expressly for the banks that need them, rather than to help cover Spain's public debt, which, as a ratio of gross domestic product, is lower than Germany's.

Only 10 days ago, Mariano Rajoy, Spain's Prime Minister, was adamant that his country's banking sector would not need bailing out. Few observers were persuaded, not least because of widespread suspicion that the full extent of Spanish banks' toxic debt is still unknown.

Back in the early days of the financial crisis, it looked as if Spain's economy – the fourth-largest in the eurozone – could withstand the squalls coming its way. But then its boom, based on inexorably rising property prices, began to totter and collapse. House prices went into freefall, and unemployment, a mere 8.3 per cent in 2007, began to rise, first to 18 per cent in 2009, and to the fearful figure of nearly 25 per cent now.

By 2009, the financial sector was sitting on €445bn of property-related loans, and regional governments saw their incomes plunge as the lucrative issuing of new construction licences and taxes dried up. Austerity measures were introduced and some lenders nationalised, but Spain's borrowing costs continued to rise. It became clear that it would be just too expensive for the country to borrow the money necessary for a bank rescue from the markets.

Eurozone finance ministers said in a statement that the bailout money would be fed directly into a fund Spain has set up to recapitalise its banks, but emphasised that the Spanish government is ultimately responsible for the loan. Still, that allows Spain to avoid making the onerous commitments forced on Greece, Ireland and Portugal when they sought bailouts.

Spain's rescue may not be the last. Attention will now switch to Italy, and Cyprus could also seek help. As the Swedish Prime Minister, Fredrik Reinfeldt – whose country does not use the euro – said: "We're talking about one of the greatest financial rescue operations the world has seen."

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine