Euro confirms up to 100b aid ready for Spain

BRUSSELS - Eurozone finance ministers confirmed on Saturday that the single-currency area is ready to offer up to 100 billion euros (about 125 billion US dollars) in financial aid to rescue Spain's ailing banking sector.

"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," the Eurogroup said in a statement on the European Commission's website after an emergency conference call of finance ministers.

"The financial assistance would be provided by the EFSF/ESM for recapitalization of financial institutions," the Eurogroup added.

The Eurogroup also confirmed that it has been informed that "the Spanish authorities will present a formal request shortly" and the euro area "is willing to respond favourably to such a request."

It said that it "supports the efforts of the Spanish authorities to resolutely address the restructuring of its financial sector and it welcomes their intention to seek financial assistance from euro area Member States to this effect."

Following the formal request, the European Commission will provide an assessment in liaison with the European Central Bank (ECB), the European Banking Authority (EBA) and the International Monetary Fund (IMF), and a proposal for the necessary policy conditionality for the financial assistance, said the statement.

The Eurogroup also praised efforts by the Spanish government to " implemented significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks."

"The Eurogroup is confident that Spain will honour its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester," said the eurozone finance ministers.

"Progress in these areas will be closely and regularly reviewed also in parallel with the financial assistance," they added.

Shortly before the Eurogroup announcement, Spanish Economy Minister Luis de Guindos told reporters in Madrid that "The Spanish government declares its intention of seeking European financing for the recapitalization of the Spanish banks that need it."

De Guindos described the terms of the rescue loan "very favourable" compared with market rates and the funds will be channelled through Spain's bank fund, the Fund for Orderly Bank Restructuring (FROB).