Spain avoids government bailout with bank rescue
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David Brancaccio: Wounded banks in Spain will now be able to draw up to $125 billion in money from the European Union. Call it a bailout, call it a big line of credit, today there was a sense that Europe has a handle on its banking crisis, although perhaps not yet its government debt crisis.
The BBC’s Tom Burridge is in Madrid. Tom, good morning.
Tom Burridge: Good morning.
Brancaccio: $125 billion is always nice for a banking system, but beyond that what is the significance of all this money?
Burridge: Well I think what we’ve seen really is Spain being hurried along by other European leaders. Spain, up to the last minute this weekend, was insisting that it would wait for a little bit longer for the independent audit on the banking system to come. That hasn’t happened, and that’s because there is pressure from other European countries to get this problem sorted before, of course, the Greek election next weekend.
Brancaccio: This is good for the banks clearly, but what about the Spanish government? One hopes that the government itself won’t need a bailout sometime soon.
Burridge: The Spanish Prime Minister, Mariano Rajoy, yesterday said exactly that. He said that if Spain hadn’t carried out all the reforms it had to date before this bailout, then actually what we would have seen was a bailout of the country in his words. But it did secure a deal which has very different conditions to those of Greece, Ireland, and Portugal. Spain will not have the interference in terms of its tax and spend policies as those other countries and that’s crucial. The reforms and the conditions will relate to the financial sector because the eurozone money will go to troubled Spanish banks.
Brancaccio: Tom Burridge, BBC Madrid, thank you very much.
Burridge: Thank you.
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