Please sir… I want some more!

Sr. de Guindos formally requested assistance
Sr. de Guindos has formally requested assistance

In a letter to the president of the Eurogroup, Jean-Claude Juncker, Spanish economy minister Luis de Guindos has formally requested assistance to recapitalise Spain’s financial institutions.

In the letter the minister said he wanted to accept the EU offer of up to 100 billion euros in capital to inject into the country’s banking sector.

“I have the honour to address you on behalf of the Government of Spain, to formally request financial assistance for the recapitalisation of the Spanish financial institutions that require it.” the letter said.

However, a specific sum was not mentioned as the minister said this was still under discussion but he hoped to have the details settled and the package finalised by July 9th.

Following two independent audits carried out over recent weeks Spain will carry out another stress test of its banks by October. This is intended to focus on seven lenders who do not currently requires help but who remain vulnerable.

This extra test will give Spain at least a couple of months to carry on negotiations for capital to be directed to the banks. The government wants to avoid taking the bailout itself and then channelling the money to the banks as this would affect public debt and could further increase the country’s borrowing costs worsening the crisis.

Spain’s Foreign Minister Jose Manuel Garcia-Margallo said Spain would insist on long maturities and low interest rates on the loans and that direct European aid to the banks was still an option.

“The way Spain complies with any and all of its commitments will be looked at with more attention than for a country which has not sought financial assistance,” said EU competition chief Joaquin Almunia yesterday.