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21 September 2012

FT: EU in talks over Spanish rescue plan


EU authorities are working behind the scenes to pave the way for a new Spanish rescue programme and unlimited bond buying by the European Central Bank, by helping Madrid craft an economic reform programme that will be unveiled next week.

According to officials involved in the discussions, talks between the Spanish government and the European Commission are focusing on measures that would be demanded by international lenders as part of a new rescue programme, ensuring they are in place before a bailout is formally requested. Negotiations have been conducted directly with Luis de Guindos, the Spanish finance minister. The plan, due to be unveiled next Thursday, will focus on structural reforms to the Spanish economy long requested by Brussels, rather than new taxes and spending cuts.

Spanish officials have for months attempted to secure EU assistance without significant strings attached, but have made little headway in face of demands from a German-led group of northern countries, as well as the Bundesbank, that any new rescue programme include firm timetables and tight monitoring regimes.

Pressure is expected to increase again next week, when the Spanish government is due to announce results of a three-month review of its financial system. The review includes how much ESM money will be needed to recapitalise the Spanish savings banks, or cajas, which were particularly hard hit by a burst housing bubble. The EU has already pledged as much as €100 billion to help recapitalise the country’s teetering banks.

Full article (FT subscription required)



© Financial Times


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