Spain has officially asked the European Union for assistance in bailing out its crumbling banks. On Saturday, Euro Zone finance ministers responded, agreeing to lend the country up to 100 billion euros, or about $125 billion, in order to avoid complete financial meltdown in Madrid.
Spain has responded to the announcement by saying it will take just over one week to specify exactly how much the country will need to avert the crisis, once independent audits reports come in, according to The Huffington Post.
The country spent about 2 and 1/2 hours on a conference call with the 17 finance ministers, which was reportedly very heated. After the call, the Eurogroup and Madrid both announced that the amount of the bailout would successfully banish any doubts about the country’s success. A Eurogroup statement said:
“The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total.”
Sky News reports that Economy Minister Luis de Guindos stated on Saturday that the aid will go only to the banking sector, so that it would not come with new austerity conditions attached for the economy in general. Even with this, the plan will allow Spain to avoid making the kind of commitments that Greece, Ireland, and Portugal were forced to make when they sought bailout money as well.
The Eurogroup statement also detailed that they expect the country’s banking sector to implement reforms, and that Spain will also be held to its previous commitments to reform its labor marked, and also to manage its deficit.
The Huffington Post reports that Edmund Shing, Eurpoean head of equity strategy at Barclays, stated:
“The figure of up to 100 billion is more encouraging and pretty realistic; it’s an attempt to cap the problem. The issue, however, is there is still a lack of detail about where the money’s coming from, which is crucial. The market will treat it with some caution until they see how it will be funded.”
Michael Noonan, the Irish Finance Minister, stated that the funds for Spain’s bailout will be provided through the EFSF or the ESM at the same interest rates as other bailout countries.