9 Jun 2012

Eurozone ministers to discuss Spain bank bailout

8:23 pm on 9 June 2012

Eurozone finance ministers are to hold a conference call to discuss a bailout for Spanish banks.

The BBC reports EU sources saying Madrid could formally request financial assistance for its troubled banks this weekend.

So far Spain has denied reports that an announcement on a European rescue plan for its banks is close.

The International Monetary Fund estimates that Spain's banks need a cash injection of at least 40bn euros.

The IMF said on Friday that a stress test showed Spain's financial sector was well managed but "vulnerable".

EU authorities earlier played down reports that Spain would ask for help as early as Saturday.

The BBC reports Spain is under pressure from Brussels to act, possibly before the feared uncertainty that could follow next weekend's Greek elections.

Audit due

Spanish Prime Minister Mariano Rajoy has insisted that any decision will come after the results of an independent audit on the Spanish banking system, which are due out within two weeks.

The audit will produce a figure of how much money, in total, is needed to prop-up Spain's banks.

A rescue deal would see money passed first to the Spanish government and then to the troubled banks.

Madrid has already announced tough financial reforms and it is likely that a deal would only carry limited conditions unlike those imposed after the bail-outs for Greece, Portugal and Ireland.

Obama warning

US President Barack Obama says European leaders must act urgently to solve the eurozone financial crisis.

He said a deep new recession in Europe would have an impact on the US economy.

At the White House on Friday, Mr Obama said European leaders needed to stabilise the continent's financial system and inject capital into weak banks "as soon as possible".

"The solutions are hard, but there are solutions," he said.

Mr Obama said the United States would support Europe as it implemented the hard solutions needed to solve the ongoing debt crisis.

The BBC reports the president said several times that the sooner the European leaders acted, the quicker people and markets would regain confidence.