BRUSSELS (MNI) – The European Commission on Monday welcomed Spain’s
formal request for financial aid to help recapitalize it’s struggling
banks and said it would begin its own assessment of the sectors’ needs
and start drafting aid conditions.

A memorandum of understanding outlining the details of the aid and
the conditions, which will apply both to individual banks receiving aid
and to the supervisory and regulatory aspects of the sector as a whole,
should be concluded in “a matter of weeks”, EU Economics and Monetary
Affairs Commissioner Olli Rehn said in a written statement

Two independent reports estimating Spanish banks’ capital needs at
an additional E51-62 billion “provide a good starting point,” Rehn said.

“Restructuring the banking sector is key to reinforce the
confidence in the Spanish economy and to restore the conditions to
proper access to credit by companies and households, thus for sustaining
the recovery,” he said.

The EU commissioner also called on Spain to maintain the momentum
in its fiscal and structural reform efforts and said that progress in
these areas would be “closely and regularly reviewed in parallel to the
financial assistance”.

Rehn said he expected Spain “to keep the same determination and the
momentum in the reforms that can bring sustainable growth and more and
better jobs, as well as to honour its commitments under the excessive
deficit procedure. Indeed there cannot be sustainable growth without
sustainable public finances, both at national and subnational levels.
Progress in these areas will be closely and regularly reviewed in
parallel to the financial assistance,” he said.

A spokesman said the Commission was still willing to contemplate
giving Spain an extra year to bring down its fiscal deficit, provided
the government can demonstrate a convincing two-year budget plan, bring
the country’s spend-thrift autonomous regions in line, and restructure
the banking sector.

European aid for Spanish banks would come from the European
Stability Mechanism, unless the new bailout fund is not ready on time,
in which case it would commence under the Eurozone’s existing bailout
fund, the European Financial Stability Facility before being
transferred to the ESM.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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