Europe plans for Spain rescue as prosecutor investigates Bankia

City A.M. Reporter
GERMANY and EU officials are urgently exploring ways to rescue Spain’s debt-stricken banks although Madrid has not yet requested assistance and is resisting being placed under international supervision, European sources said yesterday.

Spain said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.

The ECB dashed investors’ hopes of an easing of monetary policy or another flood of cheap liquidity for banks yesterday, leaving interest rates on hold at one per cent at its monthly meeting. The move raised pressure on EU leaders to outline a solution to the bloc’s festering debt crisis at a summit later this month.

Spanish economy minister Luis de Guindos said after talks at the EC there were no immediate plans to apply for a bailout.

Meanwhile Spain’s public prosecutor’s office opened an investigation into nationalised bank Bankia, potentially heightening a backlash against the lender’s bailout that has been spearheaded by small shareholders.