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Spain 'poised for bailout request'

Friday, June 08, 2012 - 02:19

June 8 - Spain is expected to ask the euro zone for help with recapitalising its banks at the weekend, sources in Brussels and Berlin said on Friday, becoming the fourth country to seek assistance since Europe's debt crisis began. Ciara Sutton reports

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Spain has so far resisted pressure to seek a bailout for its crippled banking sector. But sources say Madrid is now poised to ask for help. It's expected to apply for European funds over the weekend. That would make Spain the fourth - and largest - country to seek a bailout since the euro zone debt crisis began. Two senior EU officials say euro zone finance ministers will hold a conference call to discuss the aid package. But Spain played down the rumours. Deputy Prime Minister, Soraya Saenz de Santamaria says they will not seek aid until they know how much the banks need. (SOUNDBITE) (Spanish) SPANISH DEPUTY PRIME MINISTER SORAYA SAENZ DE SANTAMARIA, SAYING: "Once we learn about a preliminary reading of what Spanish financial system needs, the government will give its position on this matter. But I can tell you that no decisions are being made in any direction because we have to respect the procedure, and learn first what the figures released by the evaluators are, including the institutional ones." Fitch Ratings slashed Madrid's sovereign credit rating by three notches on Thursday It said the cost to the Spanish state of recapitalising banks could be between 60 and 100 billion euros. But an IMF report due out on Monday is expected to estimate Spanish banks need around 40 billion euros. Chief Market Strategist from IG Index, David Jones, says a European bailout won't solve Spain's issues. (SOUNDBITE) (English) CHIEF MARKET STRATEGIST AT IG INDEX, DAVID JONES, SAYING "I think the problem is, it may just be a sticking plaster on a much bigger problem. While we are focussing on the problems in the banking sector in Spain, we still have their bigger debt problem out there so I don't think it's going to be a medium-term solution to this crisis for the Spanish." Spain would join Greece, Ireland and Portugal if it gets a bailout. But officials say the aid would be focussed only on the banking sector, and wouldn't take the Spanish state off the credit markets. That's crucial as a bailing out Spain would put a real strain on the euro zone's rescue funds. The sources added that the political conditions would be light and not impact the austerity measures Madrid has already in place. Ciara Sutton, Reuters

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Spain 'poised for bailout request'

Friday, June 08, 2012 - 02:19