Spain finally asks for help

Rajoy finally asks for help
Rajoy finally asks for help

After months of denial, official statements assuring us that “Spain will not need a bailout” it seems the powers-that-be have accepted the inevitable and asked the EU for help.

Details of the bailout are sketchy at the moment but many are saying the details don’t matter as the bailout is only a short-term solution and not a real fix for Spain. Handing 100 billion euros to Spain’s banks is not going to kick-start the economy or create growth and jobs.

“This is a classic case of the market rallying on the expectations and then selling off on the reality,” said Michael Yoshikami, CEO at Destination Wealth Management in Walnut Creek, California.

“The news from Spain, while it avoids a crisis, still underscores there are major problems in Europe and we need to see additional action from Europe to stabilize the euro zone.”

Spain will receive a €100 billion fund injection from Europe and, El Mundo reports, has been granted a five-year grace period on repayment.  They will then have ten years to repay the money, with a 3% interest rate.

The newspaper also reported that the definitive loan details will be released next week following independent analysis of the Spanish financial sector’s capital needs. The International Monetary Fund expects the the requirements to be about €40 billion, while other estimates put the figure at more than €60 billion, both estimates far below the pre-approved €100 billion.

Adding to the pressure on Europe, Greece faces another round of elections this weekend and could see them leave the Euro completely. Cyprus has also now hinted that it may become the fifth member of the euro zone to apply for an international bailout.