Spain
caves in to market pressure and asks Europe for bank bailout
German
Chancellor urged to press ahead with plans for greater fiscal union
to tackle crisis
6
June, 2012
Spain
dropped its opposition to external funding and for the first time
yesterday appealed to Europe for help in overcoming its worsening
financial crisis, after Germany proposed a banking union to stabilise
the Continent's economy and ease eurozone turmoil.
Madrid's
call signalled a departure from the previous stance of Mariano
Rajoy's conservative government, which had rejected the idea of
external funding to assist the country in recapitalising its ailing
banks because of fears that such a move would undermine market
confidence in Spain.
Yesterday,
however, Cristobal Montoro, the Treasury minister, appeared to break
ranks with the Prime Minister when he made a direct appeal to
European institutions to help to shore up the country's banks. "The
door to the markets is not open to us at the moment," he said,
in an admission that Spain's borrowing costs were too high. "The
future of the euro is at stake."
He
told the broadcaster Onda Cero: "The banks don't need excessive
amounts to recapitalise. That's why it's so important that the
European institutions open up and help us achieve, help facilitate
that figure, because we are not talking about astronomical amounts."
Yesterday,
finance ministers from the G7 group of industrialised nations held an
emergency teleconference to discuss the crisis in which they backed
German Chancellor Angela Merkel's proposals for a European banking
union that would bring the Continent's major banks under greater
central control. She also announced German plans to accompany
austerity with measures to encourage European growth.
Before
meeting the European Commission President, Jose Manuel Barroso, in
Berlin on Monday night, Ms Merkel said that she would be discussing
the possibility of putting major banks under supervision in Europe.
"This is to make sure that national requirements do not play too
great a role," she said.
Mr
Barroso said a banking union with more integrated financial
supervision and deposit guarantees was a "necessary step"
which would consolidate monetary union with economic union. Europeans
must do "whatever is necessary to ensure the stability of our
currency", he insisted.
In
Madrid, Mr Montoro also gave his backing to the idea of a European
banking union as a means of safeguarding the single currency. Until
yesterday, Spain had insisted that it did not need outside help
despite estimates that its banks need up to €90bn (£73bn) in loans
to survive the current crisis.
Germany
was reported this week to have put pressure on Spain to accept
funding from the European Stability Facility (ESF) to help it to
solve its banking dilemma. Madrid's reluctance to accept ESF funding
has caused its borrowing rates to soar. Last week, Spain was forced
to offer 6.7 per cent interest rates on 10-year bonds – alarmingly
close to the 7 per cent rate which forced Portugal and Ireland to
accept ESF bailout funding in 2010 and 2011, respectively. Germany
was also reported yesterday to be drawing up a comprehensive
European-growth package. The Handelsblatt newspaper said the plan
involved stocking up the capital reserves of the European Investment
Bank with a cash injection of €10bn.
Spain
by numbers
€27bn
The amount being cut from Spain's most recent budget.
11
The number of days Spain's borrowing costs have been at least 5
percentage points higher than Germany's. Greece survived for 16 days
without a bailout at the same threshold.
366,000
The number of people who have lost their jobs in Spain so far this
year.
€19bn
The bailout required to save Spanish bank Bankia from collapse.
62
per cent The fall in value of the benchmark Spanish stock market
index, the Ibex, since 2007.
51.1
per cent The rate of unemployment among Spanish youths under the age
of 25.
15
per cent The expected contraction in house prices over the next year.
9.8
per cent The amount by which retail sales fell year-on-year in April
2012.
No comments:
Post a Comment
Note: only a member of this blog may post a comment.