Finance officials from across Europe are set to hold talks this weekend to discuss a possible bailout for Spain in case Madrid asks for help amid rumours that a request could come as early as Saturday.
The move comes after credit ratings agency Fitch cut Spain's sovereign rating by three notches to BBB on Thursday, highlighting the Spanish banking sector's exposure to bad property loans and contagion from Greece's debt crisis.
Five senior EU and German officials said deputy finance ministers from the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid, although no figure for the assistance has yet been fixed.
"The government of Spain has realised the seriousness of their problem," a senior German official said, according to the Reuters news agency.
Soraya Saenz de Santamaria, Spain's deputy prime minister, said that the government had not yet made a decision on whether to seek a bailout for its banks, saying that it was awaiting a preliminary estimate of how much extra capital the banks would need before taking a decision.
The International Monetary Fund is expected to file its own audit including those figures on Monday, while two independent auditors are due to file surveys later this month.
"It's important to respect the proceedings because it's important to know the ground," said Santamaria. "Before taking any kind of decision one should at least have a first estimate of the ground and the ground means figures."
He added that an agreement needed to be reached before a Greek election on June 17 which could cause market panic.
The European Commission's spokesman on economic affairs said Spain had made no request for aid and he would not confirm that talks were planned. But he added that if Spain did make a request, the eurozone was ready to help.
"If such a request were to be made, the instruments are there, ready to be used, in agreement with the guidelines agreed in the past," Amadeu Altafaj said. "We are not at that point."
Billions of euros needed
Speaking in Berlin, Angela Merkel, the German chancellor, said she was not pressing any country to take a bailout, saying it was up to Spain to decide what it wanted to do.
"It's down to the individual countries to turn to us," she said. "That has not happened so far, and therefore (we) will not exert any pressure."
Spain is expected to request aid from the eurozone's 440-billion-euro bailout mechanism, known as the European Financial Stability Facility. The amount will depend on the results of audits being conducted by the International Monetary Fund and two independent assessors.
Financial industry sources told Reuters on Thursday that a report by the IMF, expected to be made public on Monday, estimated the minimal capital needed by Spanish banks at 40 billion euros ($50.25 billion), rising to 90 billion euros for a fuller recapitalisation.
A separate independent audit of the banking sector, commissioned from consultants Oliver Wyman and Roland Berger, which the government has flagged as crucial, is due on June 21.
Fitch said the cost to the Spanish state of recapitalising banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between 60-100 billion euros ($75-$125 billion) - or six to nine per cent of Spain's gross domestic product. The higher figure would be in a stress scenario equivalent to Ireland's bank crash.
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