Spanish banks may need ECB liquidity help

 
Tim Wallace
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SPAIN’S banks might need further help from the European Central Bank (ECB) after underestimating their losses, a top minister said yesterday.

Deputy economy minister Inigo Mendez de Vigo told a Spanish newspaper that the extra liquidity injection from the ECB would help, just days after the IMF said the sector needed a €40bn (£32.2bn) recapitalisation.

Meanwhile Prime Minister Mariano Rajoy said he will not adopt all of the International Monetary Fund’s recommendations for the country, refusing to raise VAT or cut public sector salaries.

Instead he made a plea for Eurozone nations to send a message to the markets by pushing for ever closer union.

“Europe has to transmit to the world that the euro is an irreversible project,” he told members of his conservative Partido Popular party.

A week earlier he unveiled a plan to ease the crisis by arranging a bank bailout of up to €100bn, but investors were unconvinced and 10-year borrowing costs brushed the psychologically important seven per cent level on Friday.