Business

The Pain in Spain: Spanish Bailout Could Cost $125 Billion

MADRID (The Blaze/AP) – The Blaze reported Thursday that Spain’s sovereign credit rating had been downgraded to just two notches above junk status. The Blaze also reported that Spanish Prime Minister Mariano Rajoy had told European Union leaders that he would wait for a full assessment of his country’s banking sector before entertaining any notion of a bailout.

Well, the aforementioned assessment has been completed and it looks like Spain will request up to $125 billion (€100 billion) in the form or a bailout. Yes, Spain may need $125 billion to save its ailing banking sector.

A rescue for Spain will be Europe‘s fourth since the single currency bloc’s debt crisis erupted two years ago. While the country’s leaders have long said it would not need help righting its financial sector, markets have been nonetheless concerned about its ability to pay its way. In recent weeks investors have demanded higher and higher costs to lend to Spain, and it became clear it would be just too expensive for the country to borrow the money necessary for a bank rescue from the markets.

Economy Minister Luis de Guindos said Saturday the aid will go to the banking sector only and so would not come with new austerity conditions attached for the economy in general. A statement from the finance ministers of the 17 countries that use the euro explained that the money would be fed directly into a fund Spain set up to recapitalize its banks, but underscored that the Spanish government is ultimately responsible for the loan.

Still, that plan allows Spain to avoid making the same austerity commitments that Greece, Ireland and Portugal were forced to when they sought their rescues. Instead, the eurogroup statement said that it expected Spain’s banking sector to implement reforms and that Spain would be held to its previous commitments to reform its labor market and manage its deficit.

The exact figure of the bailout, however, has not yet been decided. De Guindos said the country is waiting until independent audits of the country’s banking sector have been carried out before asking for a specific amount.

De Guindos did say, however, that Spain would request enough money for recapitalization, plus a safety margin that will be “significant.” The eurogroup statement said that meant the cost could reach (EURO)100 billion.

With markets in turmoil, de Guindos said the government’s efforts to shore up the financial sector “must be completed with the necessary resources to finance the needs of recapitalization.”

“Therefore, the Spanish government states its intention to request European financing for the recapitalization of banks that need it,” the minister told a press conference after a videoconference with colleagues from the eurozone.

The Spanish acceptance of aid for its banks is a big embarrassment for Prime Minister Mariano Rajoy, who insisted just 10 days ago that the banking sector would not need a bailout.

But since then pressure has been piled on Madrid to ask for help for its banks, which are struggling with toxic real estate loans and assets.

Spain was hit Thursday with a downgrade of its credit rating to just two notches above junk by credit rating agency Fitch, which estimated Spanish banks may need as much as (EURO)100 billion ($125 billion). Then on Friday, Moody’s Investor Services warned it could downgrade Spain and other countries in the eurozone.

In the early hours of Saturday, the International Monetary Fund released a report estimating that Spanish banks need a recapitalization injection of at least (EURO)40 billion ($50 billion) following a stress test it performed on the country’s financial sector. That report came out three days ahead of schedule, underscoring the urgency of the situation.

The Associated Press contributed to this story.

Comments (35)

  • Searchingforthelight
    Posted on June 10, 2012 at 10:02pm

    If we are voting on a World Leader, lets make sure he lead the U.S. into the future and not into the ground!
    I personally don’t like the taste of the pavement, and the de-memorialization
    of the sweat and blood of those who have sacrificed so much for the Freedom of our Country.

    Report Post »  
  • G-WHIZ
    Posted on June 10, 2012 at 11:28am

    The [estimate] will necessarilly be “upgraded” in a few days/weeks/months by the GAO, as usual.

    Report Post »  
    • turkey13
      Posted on June 10, 2012 at 3:53pm

      Chump Change! Obama won‘t talk about money unless it’s at least a $$ trillion bucks. He has 150 billion left in his stash from Tarp 1.

      Report Post »  
  • HKS
    Posted on June 10, 2012 at 11:19am

    No problemo, couple of more weeks of vacation for everyone. So stressful ya know.

    Report Post » HKS  
  • teddrunk
    Posted on June 10, 2012 at 7:22am

    So the “pain” in Spain is mainly in the brain.

    Report Post »  
  • Aloha Kaleiohi
    Posted on June 10, 2012 at 1:21am

    Why are they wanting to send our election ballots to Spain….

    Report Post »  
  • Magyar
    Posted on June 9, 2012 at 10:08pm

    It only took the Socialist govenment 7 years to take Spain from boom to bust. While a more conservative government has been elected, the damage was done. This is what Socialism looks like beyond the promises and lies—especially the ‘green’ jobs BS!

    Report Post »  
    • soybomb315
      Posted on June 9, 2012 at 10:23pm

      spain and most of the developed world was in a bubble economy from 2002-2007

      Report Post » soybomb315  
    • lukerw
      Posted on June 9, 2012 at 11:47pm

      Lord, Baron, Peter Mendleson of the New Labour party… argues that the EU can and should be saved… as the Politicians put it together, and can fix it.

      Strange… I thought that Businesses built Ecomonies and caused Trade! I did not know that Politicians… alike Obama… created GNP Growth; I thought Politicians… took from the Economic System… and caused Debt!

      Report Post » lukerw  
  • soybomb315
    Posted on June 9, 2012 at 9:18pm

    The big question is….Will (or IS) the US bailing out Europe? We will find out in the next 4 years. Hope we have a president with some GUTS

    Report Post » soybomb315  
  • Micmac
    Posted on June 9, 2012 at 8:43pm

    125B will just be the down payment. It could be 10 times this in the end. Greece is still out there. The French elected a commy prez so they are closing their wallets. Greece has a NeoNazi/Technocratic govt now. Derivatives are off the charts.

    Spain has 50% unemployment in the younger peeps. Merkel is trying to figure out how to close her legs, as Germany is the only truly deep pockets country out of the 18 EU countries. All the EU banks do is play find the pea under the walnut shell. The real objective of the EU/Euro from day one has been to make Europe under the umbrella of a EU Federal Govt. It is getting closer, but countries like Italy wouldn’t play ball.

    Concluding, Spain is just coming up to bat.

    NoBama 2012

    Report Post »  
    • lukerw
      Posted on June 9, 2012 at 11:52pm

      And… a New REICH is waiting to be born… to rule over the Poor Nations. Whom needs Hitler and World Wars… when you have an EU.

      Report Post » lukerw  
  • Netsurfer2
    Posted on June 9, 2012 at 7:29pm

    How it is so interesting that when they get done with Europe, they will be looking at the good ole’ USA next! Which has bailed them out with our compounded debts! Good luck with that!

    What is also very funny is that now that we have soooo much debt and our stores have slowed down by not buying from China! Now our stores are buying from India even more (a country that believes in multiple Gods). I would rather have it that we don’t buy from anyone else if that is the case and just start making our own high quality clothing here! You now find Macy’s selling Indian merchandise (shoes) more than ever before! America should get innovative and start making their own merchandise! Our trade deficit is way to high! I‘m sure Obama is saying let’s keep encouraging more debt on our books! That’s the liberal way!

    When your in debt, you don’t ask to take on more debt! That is another way of saying it’s OK to be a slave without any choices and any rights! When are American’s going to make a stand???

    Report Post » Netsurfer2  
  • AUsername
    Posted on June 9, 2012 at 7:07pm

    don’t bailout anyone and let them fail.

    Report Post » AUsername  
    • Dougral Supports Israel
      Posted on June 9, 2012 at 8:41pm

      Its not so simple as that. There is an estimated $700 trillion in derivatives floating around. These derivatives have spread the risk of default far beyond the troubled banks. Its entirely possible and very likely that there is no way to avoid being dragged down by the demise of European banks. One thing drags down another, and another… I believe we face a very big risk of a massive global crisis followed by world war.

      Report Post »  
    • soybomb315
      Posted on June 9, 2012 at 9:20pm

      Thats how the game is played….They make the case that we HAVE to bail everyone out or we collapse. That is why Ron Paul has been so damn determined to get rid of this corrupt financial/monetary system. What is the point of building the military and fighting all these wars if we are so weak financially? Need to change the system NOW

      Report Post » soybomb315  
  • NOBALONEY
    Posted on June 9, 2012 at 6:57pm

    125 billion euro band-aid. Troubled banks are still being audited. Estimates put the figure at between 125- 450 euros.

    Report Post » NOBALONEY  
  • Tankertony
    Posted on June 9, 2012 at 6:23pm

    Only that much to pay off their version of the union scam?

    Report Post » Tankertony  
  • Ron Staiger
    Posted on June 9, 2012 at 6:20pm

    Without a central banking authority, the eurozone and the eurodollar is doomed. Germany should get out while she can- let the French pay for something, for once!

    Report Post »  
  • brickmoon
    Posted on June 9, 2012 at 6:05pm

    What’s the big deal — it’s only like the cost of 250 Solyndras.

    Report Post » brickmoon  
  • shogun459
    Posted on June 9, 2012 at 5:55pm

    You DON’T give a wino cash.

    You DON’T give a addict cash.

    WHY give a country that’s a spend-a-holic cash?!?!

    WHY are we going to do just that, OVER AND OVER AND OVER until we’re broke and then the world WILL turn to us, they will come to plunder our Coal, Oil and Natural Gas That Obama, Clinton and the left have set aside for them and off limits to us.

    Report Post » shogun459  
  • shogun459
    Posted on June 9, 2012 at 5:52pm

    Didn‘t GLENN BECK warn this was coming about 2 years ago IF we didn’t stop it at Greece, and the ONLY WAY to stop it is to let the countries FALL because they will COLLAPSE anyway and anyone that weakens themselves helping them.

    Never throw good money after bad, we USED to teach children sayings like that.

    Report Post » shogun459  
  • The_Almighty_Creestof
    Posted on June 9, 2012 at 5:51pm

    How many bailouts has Greece had? And it is still going down in flames?

    Don’t bother helping Spain…all that will happen is the greediest of the greedy will grab every penny for themselves before the unavoidable fall happens anyway.

    To heck with them…

    Report Post »  
  • Snowleopard {gallery of cat folks}
    Posted on June 9, 2012 at 5:15pm

    How much more US Funding is Obama going to waste on the great disaster coming with the EU and its absolute collapse? When will the US people say enough of his insanity is enough and heap the pressure on him to end this ongoing madness on the US end?

    The Euro and the EU are finished; and no thanks to Obama and his uttermost insanity we are forged to the sinking ship by chains of economic titanium. Imagine well what will happen when the $5T (I have heard a range of 3-8T Euro) Euros exchanged in his insanity for Dollars collapses into a heap of ashes?

    What shock on the US system alone will this have in the ongoing reset?

    Report Post » Snowleopard {gallery of cat folks}  
    • lukerw
      Posted on June 9, 2012 at 5:44pm

      ‘Know when to Hold-em; Know when to Fold-em’!

      Report Post » lukerw  
    • Snowleopard {gallery of cat folks}
      Posted on June 9, 2012 at 7:28pm

      @Luke:

      That is so true; yet the gambler in this case is the insane one of the White House who cares for nothing save his own power and control over the nation. He WANTS the nation to collapse so he can finish the transformation into a socialist-communist regime under his iron grip.

      Report Post » Snowleopard {gallery of cat folks}  
    • lukerw
      Posted on June 9, 2012 at 7:47pm

      Exactly!!!

      Report Post » lukerw  
  • lukerw
    Posted on June 9, 2012 at 5:11pm

    Did you see ‘The Munk Debate” on C-Span? Canada gathered 4 EU VIPs to Debate if the EU was a Failed EXPERIEMENT… then the Canadians voted.

    55% to 45% Canadians voted… the EU should Double Down… continue the Experiement… and Impose a Federal System over the EU!

    Report Post » lukerw  
  • patspeak
    Posted on June 9, 2012 at 5:10pm

    The Credit Card for America has expired! Past due, period! Obama is in serous, serious troubles. He has lost is credit card, losing rapidly his liberal buddies. God willing, “Wake up America at the polls November the 6th, 2012 and give Obama and all Rinos in Congress (Dems &, Pubs) a real headache and knockout wallop”.

    Report Post » patspeak  
  • Dougral Supports Israel
    Posted on June 9, 2012 at 5:06pm

    Billions here, billions there. The European house of cards continues its slow collapse. I wonder how much longer we have before the whole thing comes down all at once? Politicians there and over here will smile and tell us everything will be OK, just let us do this one last teeny, tiny bailout.

    Report Post »  
  • Sue Dohnim
    Posted on June 9, 2012 at 5:06pm

    The Soros funded Progressive think tank CEPR calls for Bernanke to bail out Spain aka US taxpayers

    Soros propaganda to subvert the $US.. he always promotes debt expansion…

    “Washington, DC– Center for Economic and Policy Research (CEPR) Co-Directors Dean Baker and Mark Weisbrot issued the following statement today, calling for action by the U.S. Federal Reserve to contain the eurozone crisis. Weisbrot just returned from Spain, where he observed the impact of the crisis firsthand.”

    The statement reads:

    “The financial crisis in the eurozone, now centered on Spain, is contributing to the slowdown in the U.S. economy and opens the possibility of a worse financial meltdown, of the type that followed the collapse of Lehman Brothers in 2008. This could tip the U.S. economy into recession.

    http://bit.ly/NcBPJQ

    Soros funding
    http://www.cepr.net/index.php/funders/

    Report Post » Sue Dohnim  
  • glennrocks
    Posted on June 9, 2012 at 5:00pm

    Is the U S helping to bailout Spain? I’ve noticed that the liberals think you have to spend more money when your in debt. Will that work at my house too?

    Report Post »  
    • shogun459
      Posted on June 9, 2012 at 5:57pm

      yeah it does quit your job fake an injury or just get fat file the right papers and you make more money than if you worked.
      Oh but you have to sell your soul first.

      Report Post » shogun459  
  • Want our country back
    Posted on June 9, 2012 at 4:54pm

    Should’ve listened to Glenn 2 years ago…. he warned all of us that this was going to happen in Europe and he was right yet again….. He also warned us that this chaos will happen here and he’s right yet again. Too bad that there are those that just don’t believe history will repeat itself. Love Glenn’s history lesson to make us see it. Some will learn from those lessons and some will mock them. Right now we have to concentrate on our own country and heal her, then perhaps we can help others as we have always done.

    GOP2012

    Report Post » Want our country back  
  • possom
    Posted on June 9, 2012 at 4:50pm

    Quick take obama‘s usa credit card’s away or he’s going to give away more of OUR money!

    Report Post » possom  

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