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."
- 2 Why this father didn’t hide his daughter’s heroin overdose in her obituary
- 3 Smartphones are making children borderline autistic, says psychiatrist
- 4 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
Nepal earthquake in pictures: Photos show devastation caused by 7.8 magnitude earthquake
Nepal earthquake: More than 1,100 killed across four countries and in Mount Everest avalanche
Royal baby: Live updates as the wait continues for Duchess of Cambridge's second child
Hermann Goering's daughter fails to reclaim items looted by Nazi deputy during WWII
Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
£26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...
£16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...