Expert opinion: spain’s banks need up to 62 billion euros

Expert opinion: spain's banks need up to 62 billion euros

According to diplomats, the euro finance ministers signaled at their meeting in luxembourg on thursday that they wanted to help with emergency loans. Almost two weeks ago, the eurogroup had already promised the spanish banks support of up to 100 billion euros.

However, the official application for the emergency loans is still pending. Economy minister luis de guindos said on the fringes of consultations with his colleagues that the official request would not be made until the next few days. The international monetary fund (IMF) had estimated the financial needs of spanish banks at at least 40 billion euros. Economists have put the figure at 60 to 80 billion euros.

Euro heavyweight spain is under pressure from financial markets over its severe banking crisis and has to pay high risk premiums for its long-term government bonds. Italy, which is heavily indebted, is also in crisis and is increasingly in the focus of the markets.

According to a report by oliver wyman, in the worst case scenario, the money houses in spain need between 51 and 62 billion euros. Roland berger put the capital requirement at a maximum of 51.8 billion euros. The vice chairman of the spanish central bank, fernando restoy, announced the results of the appraisals in madrid.

Spain will not need the full amount of up to 62 billion euros from the european bailout fund, according to vice-economy minister fernando jimenez latorre, because several financial institutions have been able to cover their capital needs through private financial sources. The lowen share of the shortfall would be accounted for by bankia, which had already been cut by the state, and the three money houses nova caixa galicia, caixa catalunya and banco de valencia.

According to EU competition commissioner joaquin almunia, one of the latter three institutions could even be closed down. With this cleanup, the spanish socialist triggered unrest in his home country a week ago. The madrid ministry of economics and the state bank bailout fund frob stressed in return that the closure of a bank was not planned.

Federal finance minister wolfgang schauble (CDU) said before the publication of the reports in luxembourg: "everything is proceeding in an orderly manner."There are no changes to the agreed timetable.

In the debate about possible bond purchases by the EFSF bailout fund, schauble referred to contractual regulations. The contract for the EFSF allows, under certain conditions, purchases on the so-called secondary market – where bonds that have already been issued are traded. "That is known, that is regulated." A country must submit an application, and there must be an adjustment program, said schauble.

The ministers also discussed the aid program for greece. Quick decisions on a possible extension of repayment deadlines were not anticipated. Interim treasurer giorgos zanias represented athens – successor vasilios rapanos could not be sworn in on time. Even before the meeting, it had become clear that the aid agreement between athens and its international donors would have to be renegotiated. How this will look in detail was not yet clear. Experts from the "troika" will travel to athens in the next few days to get a clear picture of the financial situation, according to EU commission president jose manuel barroso.

IMF chief christine lagarde also came to the grand duchy. She assured that the IMF would "put all its knowledge and expertise at the disposal of the europeans to help them achieve their objectives". At the G20 meeting in mexico at the beginning of the week, the europeans were sharply criticized by international partners because of the debt crisis.

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