Spain to decide this month on bailout deal
Spain has indicated it could decide this month whether to request a bailout for its troubled banking sector.
Deputy Prime Minister Soraya Saenz de Santamaria said today the government will not act until receiving evaluations from the IMF on Monday and then two independent auditors Spain has hired.
The economy ministry said on its website that the latter are expected by June 21 at the latest.
The official said after a Cabinet meeting no decision on a bailout has been taken.
Commenting on reports that eurozone finance ministers will hold a conference call on Saturday on Spain, Saenz de Santamaria said “no meeting is planned”.
She would not confirm or deny whether some kind of contact would take place.
The step would make Spain the fourth country in the 17-member eurozone to seek help since the EU debt crisis broke out.
"Once the estimates of the numbers are known with regard to what the financial sector might need, the government will state its position," Saenz de Santamaria said.
"But in any case, I am telling you that no decision has been made either way," she added.
Saenz de Santamaria declined to say how much the sector, hit by the collapse of the country's real estate bubble, might need.
Estimates of the cost of bailing out Spain's banks vary greatly, from €40bn to as much as €100bn.
The Spanish government appears to have resigned itself to the fact that it needs a bailout to prop up its struggling banks.
Prime Minister Mariano Rajoy has moved on from firmly stating that "there will be no rescue of the Spanish banking sector" 10 days ago to avoiding ruling out seeking external help for the banking sector of the eurozone's fourth largest economy.
Spain has been criticised for being too slow to set out a roadmap to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil sparked by the Greek elections on June 17.
There are concerns that anti-bailout left-wing party Syriza could become the largest party in the Greek parliament, putting the country's membership of the eurozone at risk.
"What we now crucially need is transparency and trust," said Andreas Schmitz, the head of Germany's banking association. "Any further uncertainty, any speculation how the situation could develop is poisonous for the markets."
If Spain asks for a bailout and taps the European Financial Stability Facility, the move could raise larger questions about the Spanish government's ability to keep refinancing its debts in the bond market, analyst Ralph Solveen at Commerzbank wrote in a note to investors.
"After all, Spain would be admitting by such a request for support to banks, that it can no longer finance itself for all purposes on the market," Solveen said.
Investor doubts about a country's ability to maintain its debts can lead to higher borrowing costs, which in turn undermine the government's ability to finance itself.
Greece, Ireland and Portugal have all fallen victim to such market doubts and were forced to take bailouts from the other eurozone countries.
A Spanish bank bailout could also turn market focus to Italy, which has the second-highest debt load in the eurozone after Greece at some 120% of gross domestic product.
Italy's budget is in better shape but its growth prospects have sagged and the willingness of Italian politicians to tackle the country's long-standing problems with choking bureaucracy, taxes and regulation remains in doubt.
