Spanish PM says deal is win for eurozone

Mariano Rajoy says $125bn bailout package for debt-stricken Spanish banks has proved credibility of single currency.

The Spanish prime minister has said that the eurozone’s bailout of its struggling banks is good for Spain and Europe, as major world economies praised the deal.

Bailouts at a glance

undefined Spain
Population: 47 million
GDP (2011): $1.3tn
Debt as a percentage of GDP (2011): 68.5 per cent
Bailout amount:

undefined Greece
Population: 10.8 million
GDP (2011):
Debt as percentage of GDP (2011): 165 per cent
Bailout amount: About $140bn in 2010 and another $170bn this year

undefined Ireland
Population: 4.7 million
GDP (2011): $195bn
Debt as a percentage of GDP (2011): 108 per cent
Bailout amount: $110bn in November 2010

undefined Portugal
Population: 10.8 million
GDP (2011): $213.8bn
Debt as a percentage of GDP (2011): 108 per cent
Bailout amount: $116bn in 2011

Mariano Rajoy said on Sunday the eurozone deal had secured for Madrid a “line of credit” for the country’s debt-stricken banks that would ensure the “credibility of the euro”.

“Yesterday, the credibility of the euro won,” he told a news conference the day after eurozone ministers agreed to provide Spain with up to 100 billion euros ($125bn) to cover losses at its banks.

The Spanish leader insisted his government’s reforms since taking power in December had averted the need for a broader state bailout.

“If we had not done what we have done in the past five months, the proposal yesterday would have been a bailout of the kingdom of Spain,” said Rajoy.

“What happened yesterday was part of a global plan to clean up the Spanish economy and to lead to the creation of employment and economic growth,” he said. “We have to make these decisions to come out of the crisis.”

Rajoy said the economic situation in Spain was delicate and that the eurozone member needed serious reforms to make it flexible and competitive.

“There have been structural reforms made in order to make more employment available and now we are restructuring our financial system,” he said.

Rajoy said he would control public expenditure and take further steps to improve the financial sector.

Saturday’s announcement in Madrid brought protesters onto the streets amid fears that the bailout deal could be contingent on a series of punishing austerity measures.

Members of the Indignado movement and their supporters said suffering citizens – rather than financial insitutions – should benefit from international aid.

But Rajoy insisted that Spain had not caved in to pressure from other nations and from the financial markets, which have sent Spain’s borrowing costs soaring on concerns over its banks and mushrooming debt.

“Nobody pressured me and I don’t know if I should say this, but it was I who pressured for a line of credit,” Rajoy said.

Praise for the deal

The rescue loan for Spain marked a dramatic, public U-turn for Spain, which had hotly denied any need for outside aid.

It finally sought aid as its borrowing costs on the open markets soared and the price for fixing the banks’ balance sheets, heavily exposed to a property bubble that burst in 2008.

Madrid had until Saturday been reluctant to admit to needing any kind of external assistance, or a bailout, because of the political and economic stigma attached to such a move, Al Jazeera’s Jonah Hull, reporting from Madrid, said.

“But the government is desperate to avoid any impresison that it’s been rescued by the EU,” our correspondent said.

He said Madrid is depicting the tranche as a “rather large bank loan at favorable rates of interest … to promote growth and bring jobs and prosperity … but the overall economic picture is extremely gloomy.”

The eurozone debt crisis has now snared the bloc’s fourth-biggest economy; Spain’s is twice the combined size of those of Greece, Ireland and Portugal, the countries bailed out so far.

Recently nationalised Bankia, which has the largest exposure to real estate, needs an extra 19 billion euros to repair its books, in addition to 4.5 billion euros already injected by the state.

Global leaders have hailed the Spanish government’s move to seek financial help.

IMF chief Christine Lagarde called it “credible”, while Timothy Geithner, the US Treasury Secretary, called the move an important step toward financial union.

Wolfgang Schaeuble, the German finance minister, said: “I welcome, like other Eurogroup colleagues, the Spanish government’s determination to recapitalise [the banks] via the European rescue funds EFSF or ESM with corresponding conditions.”

Source: Al Jazeera, News Agencies


Al Jazeera gives you the latest developments affecting the eurozone, as European leaders fight to contain economic turmoil. How will the region react to Francois Hollande taking over as France’s president, and to ongoing political instability in Greece?

Published On 23 May 2012
More from Economy
Most Read