THE Eurozone has agreed to lend the Spanish banks up to 100bn euros without demanding any austerity measures after Spanish Economy Minister Luis de Guindos confirmed a request for financial assistance.
De Guindos said there would be no austerity conditions.
The austerity-free loan has touched off demands from Ireland, and from Greece that their EU loans should be renegotiated and the load of austerity measures lightened.
After an hours-long conference call of the 17 finance ministers, the Eurogroup and Madrid maintained that the amount of the bailout would be sufficiently large to banish any doubts.
‘The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100bn euros in total,’ a Eurogroup statement said.
Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies – Oliver Wyman and Roland Berger – deliver their assessment of the banking sector’s capital needs some time before 21 June.
‘The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it,’ de Guindos told a news conference in Madrid.
He claimed the amounts needed would be manageable, and that the funds requested would amply cover any needs.
Meanwhile, Irish Finance Minister Michael Noonan said the Spanish deal would not mean a better deal for Ireland on its banking debts.
Speaking in Limerick on Saturday evening, Noonan said the deal agreed with Spain replicates the recapitalisation part of the deal that was done for Ireland.
He described the deal as ‘satisfactory’ and said it would bring about much needed stablity to the eurozone.
Noonan said that he would have preferred if the money was pumped directly into the Spanish banks rather than through the sovereign and he said he would expect the same to apply to Ireland.
He said it was not the day for discussing that, but he told Saturday afternoon’s conference call that he would be returning to it at future Eurozone meetings.
De Guindos refused to describe the aid as a rescue, which his government had categorically ruled out even in the days leading up to the formal request for cash.
‘This has nothing to do with a rescue,’ he insisted, arguing that the aid would be directed to the 30% of banks with the greatest exposure to the 2008 property market crash.
The deal imposed no conditions on the overall Spanish economy, and no new austerity measures, de Guindos said.
‘The only conditions are for the banks. There are no additional conditions for the Spanish people,’ he added.
A bailout for Spain’s banks would make it the fourth country to seek assistance since Europe’s debt crisis began.
With loans to Greece, Ireland, Portugal and now Spain, the EU and IMF have now committed around 500bn euros to finance European bailouts.
Officials said there had been a heated debate over the International Monetary Fund’s role in Spain’s bank rescue, which Madrid wanted kept to a minimum.
It will not provide any of the money.
It was eventually agreed that the IMF would help monitor reforms in Spain’s banking sector, while EU institutions would ensure Spain stuck to its broader economic commitments.
IMF Managing Director Christine Lagarde said the Eurozone’s plan was consistent with the IMF’s estimate of the capital needs of Spain’s banks and should provide ‘assurance that the financing needs of Spain’s banking system will be fully met.’
The Eurogroup said the funds could come from either the Eurozone’s temporary rescue fund, the EFSF, or the permanent mechanism, the ESM, which is due to start next month.
Finland said that if money came from the EFSF, it would want collateral.
EU officials said there was a preference to channel money to Spain through the ESM, rather than the EFSF.
Under the ESM, an approval rate of 90% or less is needed to trigger aid, and the fund also has more flexibility in how it operates.
‘That’s why it’s so important that the ESM . . . be ratified quickly,’ German Finance Minister Wolfgang Schaeuble said.
The Spanish government has already spent 15bn euros bailing out small regional savings banks that lent recklessly to property developers.
Spain’s biggest failed bank, Bankia, will cost 23.5bn euros to rescue and its shareholders have been wiped out.
Meanwhile, the Irish section of the union Unite is focussing on the Irish crisis, and said the only issue for the government must be unemployment.
Unite has called on the government to focus exclusively on unemployment following the release of figures which show that the jobless rate now stands at 14.8%, up from 14.2% since Fine Gael and Labour came to power.
‘It has spent too much time justifying austerity and not enough time countering its disastrous impact on our society’ said Unite Regional Secretary Jimmy Kelly.
‘18,100 fewer people are now working in Ireland than a year ago.
‘That’s 18,100 homes that have lost a wage, 18,100 more on social welfare, 18,100 more looking at a future with little hope in Ireland for them and their families.
‘It is 18,100 fewer people to spend in the real economy and save more jobs from being lost.
‘This is the only issue for government to address.
‘Without jobs there is no hope of recovery.
‘The rate of long term unemployment now stands at 8.9% or nearly 190,000 people and that is an enormous measure of despair.
‘We either remain as slaves to the markets or we take a stand to say that jobs for workers in Ireland are the only way that we can escape this crisis.’
l Members of the Employment Appeals Tribunal have strongly criticised the government’s proposals to reform employment rights bodies – which would include the abolition of the EAT.
The criticism is contained in a paper prepared on behalf of Vice-Chairpersons and members of the EAT.
The EAT members, many of whom are lawyers, say the proposals would bring the whole reform process into disrepute and disorder and give rise to a major increase in judicial reviews and appeals at huge extra cost.
At present, cases are heard by three members – a chair with legal experience, along with one employer and one employee representative.
The EAT members criticise as ‘flawed and potentially unfair’ the proposal to devolve initial decision-making, particularly on unfair dismissal claims, to lone civil servants with relatively little experience of industry or law.
They point out that the EAT caseload has trebled in recent years, from 3,173 in 2007 to 9,458 in 2009. There was a further increase of 30% in 2010, and another rise of 11% last year. No additional resources have been allocated to deal with the increase.
