Spain gets its €30bn bailout, but it comes with new cuts

Miners have been blocking roads and train lines in protest at a 63 per cent cut in subsidies


Eurozone finance ministers agreed yesterday to the latest in a series of packages aimed at stemming Spain's financial crisis, by bringing forward some previously committed aid to the country's ailing banks and giving the government more time to cut its budget deficit.

However, the strings attached include yet more austerity measures for a country struggling with recession and where nearly one in four are jobless. Protests grow daily, while the financial markets gave Spain little respite as wrangling continued over providing more money for the banks.

The deal hammered out overnight in Brussels will allow an injection of €30bn into Spanish banks by the end of July if needed, which falls short of the €62bn auditors say the lenders need to prop up balance sheets battered by a property bubble which burst in 2008.

Last month, European ministers decided to lend the banks up to €100bn, but doubts about how much they will in fact get, as well as when and under what conditions, have pushed up Spain's borrowing costs to levels which could force the eurozone's fourth-largest economy to seek a bailout that Europe may be ill able to afford. The other main plank in the accord gives Spain until 2014, rather than 2013, to cut its deficit to below a eurozone limit of 3 per cent of GDP, down from 8.9 per cent last year.

Spain pledged earlier this year to slash its deficit to 5.8 per cent of GDP in 2012 by saving €45bn through spending cuts and tax rises, but with income tax revenues diving, even these draconian measures have made that goal look too ambitious.

Spain's Economy Minister, Luis de Guindos, said yesterday's deal was "frankly very positive" for Spanish banks and that "there have been no more implications and impositions than those that had been set out beforehand".

His denial notwithstanding, Mr de Guindos is today due to give Spain's parliament details of another €30bn in cuts – €10bn this year, the rest in coming years – as well as increasing taxes, and Prime Minister Mariano Rajoy's conservative People's Party government has already said it is planning to increase value added tax. The PP had ruled out increasing VAT when it was elected last November amid widespread discontent over austerity measures imposed by its Socialist predecessors.

Financial markets gave Spain little respite after the deal, which still left open the question of when Europe will set up a permanent bailout fund – the European Stability Mechanism, originally due to be up and running this month. Even when the ESM is ready, it may have to wait until a single European banking supervisor is set up next year before it can fund Spanish banks.

The widely watched interest rate on Spanish 10-year government bonds has barely eased since Monday and is stuck near the 7 per cent level at which Portugal's government was forced to ask for a full-scale bailout last year.

"Hopes have faded to the extent that we have gone from statements to deeds. If the capital injection depends on setting up a supervisor, the (bank) bailout will take time, because Germany and its satellites can delay approval of the supervisor," an editorial in Spain's leading newspaper El Pais said.

Miners, traditionally the most combative members of Spain's labour movement, have meanwhile been blocking dozens of roads and train lines for weeks in protest at a 63 per cent cut in subsidies to the coal industry, which they say will destroy whole communities where no alternative jobs exist.

Two columns of miners have been marching hundreds of miles from valleys in northern regions Asturias, Aragón and León and converged on Madrid yesterday as they sang the traditional and stirring "Santa Bárbara" anthem about a pit disaster.

Last night, they gathered at the capital's emblematic Puerta del Sol, the scene of riotous celebrations when Spain won the European football championship last week, to hold a mass demonstration later today against what they see as a full-blown attack on the welfare state.

Spain's pain

€30bn Value of bailout agreed yesterday for Spain's troubled banks.

25% Drop in house prices since 2008.

24.3% People unemployed – the highest in the EU.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Ashdown Group: Senior Accounts Assistant - Accounts Payable - St. Albans

£26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Installation and Service / Security Engineer

£22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

Recruitment Genius: Service Charge Accounts Assistant

£16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions