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Spain may seek European bailout money: Newspaper

Centre-right daily El Mundo says the state might need eurozone funds to help banks

AFP, Monday 28 May 2012
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Views: 393

Spain's government may seek European financial bailout funds to shore up its banks if market borrowing rates remain too high, a newspaper said on Monday.

Centre-right daily El Mundo said the state, which has received a request for 19 billion euros ($24 billion) to rescue troubled lender Bankia, may have to inject another 30 billion euros into the sector.
To raise funds on the market, Spain now has to pay a risk premium -- the extra annual borrowing cost when compared to safe German government debt -- of about five percentage points.
On Monday morning, the risk premium hit a euro-era record of 509 basis points.
If the risk premium remains at high levels, "Spain could ask for help from the European Financial Stability Facility," a government official was quoted as telling El Mundo.
"It is a possibility, although now every hypothesis is possible," the source reportedly said.
A spokeswoman at the Economy Ministry told AFP that the government's policy of not requesting outside aid, "has not changed."
The EFSF, which is backed by European nations including Germany, obtains money at cheap rates on the sovereign debt markets and passes them on to troubled nations such as Greece, Ireland and Portugal.
El Mundo quoted an unnamed government official as saying that Europe had not yet decided how to handle Greece's situation as it headed to decisive elections.
Government officials told the paper that the financial system would require at least another 30 billion euros of public money in addition to Bankia's request for 19 billion
euros to salvage balance sheets exposed to the collapsed property sector.
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