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2012-06-10 01:07:50
Spain's decision to request a loan of up to 100bn euros ($125bn; 80bn) from
eurozone funds to help shore up its struggling banks has won broad support.
The International Monetary Fund (IMF) said the bailout was big enough to
restore credibility to Spain's banks.
Washington welcomed the measure as a vital step towards the "financial union"
of the eurozone.
The move was agreed during emergency talks between eurozone finance ministers
on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should provide
"assurance that the financing needs of Spain's banking system will be fully
met".
"I strongly welcome the statement by the Eurogroup, which complements the
measures taken by the Spanish authorities in recent weeks to strengthen the
banking system," she said.
"The IMF stands ready, at the invitation of the Eurogroup members, to support
the implementation and monitoring of this financial assistance through regular
reporting."
US Treasury Secretary Timothy Geithner welcomed the latest moves as "important
for the health of Spain's economy and as concrete steps on the path to
financial union, which is vital to the resilience of the euro area".
France's Finance Minister Pierre Moscovici said the deal would "contribute to
restoring confidence in the eurozone".
The president of the European Commission, Jose Manuel Barroso, said he was
confident that through bank restructuring and other reforms, Spain could
gradually regain the confidence of investors and create the conditions needed
for sustainable growth and job creation.
'Not a rescue'
Earlier, Spanish Economy Minister Luis de Guindos announced that his country
would shortly make a formal request for assistance.
He said the help would be for the financial system, not the economy as a whole.
"This is not a rescue," he said.
Mr De Guindos said the aid would not come with new austerity measures attached
to the economy. Spain has already imposed strict economic reforms in a bid to
tackle its debt problems.
The loan will bolster Spain's weakest banks, left with billions of euros worth
of bad loans following the collapse of a property boom and the recession that
followed.
Some banks borrowed large amounts on the international markets to lend to
developers and homebuyers, a riskier strategy than funding it with deposits
from savings.
The exact amount that Spain will receive will be decided after the completion
of two audits of its banks, due to be completed by the end of June.
The money will come from two funds created to help eurozone members in
financial distress - the European Financial Stability Facility (EFSF) and the
European Stability Mechanism (ESM), which enters into force next month.
Investors have recently demanded higher and higher costs to lend to Spain,
making it too expensive for the country to borrow the money needed for a bank
rescue from the markets.