Spain to learn extent of bank bailout needs

Ben Southwood
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SPAIN will on Thursday find out how large a European Central Bank bailout its besieged banking sector needs, when consultancy Oliver Wyman publishes the details of its investigation into the sector.

This report, which looks into the 14 banking groups constituting some nine tenths of the sector, is expected to produce a figure of around €60bn (£48bn), Spanish finance minister Luis de Guindos confirmed over the weekend. This will come out of the €100bn already earmarked for bailing out Spanish banks.

Meanwhile Spain is believed to be in talks with the European Central Bank over the prospect of a larger bailout for the government as a whole.

As Germany’s constitutional court has approved the creation of the European Stability Mechanism (ESM) bailout fund, Spain will have access to the necessary funds if it needs to follow Ireland, Greece and Portugal in tapping other European governments finances.

If Mariano Rajoy takes that step, it would also open the door for the ECB to buy Spanish bonds, relieving the pressure even further on the beleaguered government.

However, simply having this support on offer has pushed down government bond yields in recent months, reducing the pressure on the government and so reducing the need to ask for help, pushing any bailout further into the future.

Indeed, De Guindos said there was no need to rush the process.

“This is not about rescuing Spain but about making sure that the euro currency project is a project for everybody,” he said over the weekend. “Spain will do what it has to do but with no rush.”

But Spain will publish the details of its budget and reform plan on Thursday.