Spain will apply for eurozone aid for its banks on
Monday, Economy Minister Luis de Guindos said Friday in Luxembourg,
but described the letter as a "mere formality."
More important was a memorandum expected to be signed on July 9,
which will define the amount of the loan, its conditions and
reimbursement period, de Guindos said during a European Union finance
ministers' meeting.
The eurozone has pledged up to $126 billion for Spanish banks, which were hit hard by a property crash
and by the current recession.
An independent auditor's report ordered by the government, which
was made public Thursday, estimated the need to up to 62 billion
euros over three years.
Spanish banks made gains on the Madrid stock exchange following
the release of the report, as well as another one, which indicated
that the eurozone would be able to meet banks' recapitalization
needs.
The risk premium measuring the difference between Spanish and
German 10-year bonds also dropped below 500 basis points.
The government had expected borrowing costs to fall once the
auditors' reports clarified Spain's needs.
The possibility of the loan being given straight to Spanish banks,
instead of passing through the government, remained on the table,
Guindos said earlier Friday.
The International Monetary Fund (IMF) has criticized plans to
rescue the Spanish banking sector via loans to the government, a
method that would increase the country's debt. IMF chief Christine
Lagarde called for aid to be given directly to banks.
Germany has refused that option in the past. On Friday, German
Finance Minister Wolfgang Schaeuble said in Luxembourg that the IMF's
recommendations were "very helpful" and an "important contribution."
The external assessment on the recapitalization needs of Spanish
banks "helps rebuild credibility somewhat," though "it is clear that
Spain will remain in a perilous situation for the moment," Barclays
Bank's economic research unit said in a note.
The ratings agency Standard & Poor's said the eurozone support
line to Spain would not immediately influence its ratings on Spanish
banks.
"Our outlooks on Spanish banks remain primarily negative," the
agency said. It expressed scepticism "about the bailout being able to
reduce the financial system's funding challenges in the short term as
well as on lending resuming any time soon."
