Loan for bank debt requested
Luis de Guindos, Spain’s Minister for the Economy and Competitiveness yesterday made a formal request for funds from the European Union to help out its ailing banks.
The request was made after pressure had built for Spain to do something as it became clear that the amount of toxic debt being held by their banks could not be sustained. The government had wanted to hold back until the conclusion of an audit on 21st June but clearly they felt obliged to go public.
The request was met with a pledge from Eurozone Ministers to lend up to €100 billion to Spain’s banks, although Spain has made it clear that the money is not required for its sovereign debt. The IMF has suggested that the banks may require up to €50 billion and therefore the precise amount remains in doubt until the audit is complete on 21st June.
It is difficult to judge how the markets will react when they open on Monday, but most analysts are predicting that the move by Spain and the comparatively small amount being requested will steady the markets.