Spanish bailout terms agreed

Spanish Finance Minister Luis de Guindos with ECB President Mario Draghi
Spanish Finance Minister Luis de Guindos talks with ECB President Mario Draghi in Brussels

Finance ministers of the eurozone have today agreed on the terms of the loan that will help Spain to recapitalize it’s banking sector and have decided to mobilise 30 billion euros by the end of the month as “contingency”, said President of the Eurogroup, Jean -Claude Juncker.

“We have reached a political agreement on the memorandum of understanding on the conditions for the Spanish financial sector,” said Jean-Claude Juncker, who revealed that the maturity of the loan will be up to 15 years (mean 12.5 years).

The Eurogroup are expected to give final authorisation to the loan when they return to Brussels on July 20th to finalise the agreement, having first obtained the approval of their governments or parliaments.

As part of the agreement with Spain, finance ministers from all 27 European Union countries are expected to approve a one-year extension, until 2014, to Spain’s deadline for achieving a budget deficit of 3%.

Mr Juncker said there will be specific conditions for specific banks, and the supervision of the financial sector overall will be strengthened.

“We are convinced that this conditionality will succeed in addressing the remaining weakness in the Spanish banking sector,” he said.

Dutch finance minister Jan Kees de Jager said the agreement should be finalised soon as they now have “a tentative deal on the bailout conditions for a bailout of Spanish banks”.

“The total will likely be 100 billion euros. Some countries like the Netherlands, Germany and Finland need to get parliamentary approval. We hope this can be wrapped up within a week.”

The exact amount of the bailout requirement is still not known and is unlikely to be until September, when individual independent examinations and audits of different Spanish banks have been completed.