Business Today

Spain gets $51 billion from Brussels to bolster banks

The Spanish government has said that the Euro 39.5 billion ($51.3 billion) in bailout funds approved by European authorities for the country's troubled banks has arrived.

twitter-logoAssociated Press | December 12, 2012 | Updated 17:51 IST

The Spanish government on Wednesday said that the Euro 39.5 billion ($51.3 billion) in bailout funds approved by European authorities for the country's troubled banks has arrived.

The funds are part of a Euro 100 billion credit line earmarked for Spain's banks by the other 16 European Union countries that use the euro.

A spokeswoman for the Economy Ministry said the money is now in the hands of a state-run fund set up to help those banks worst hit by the property market collapse in 2008. It is expected to be distributed to the banks over the coming days.

The official spoke only on condition of anonymity in keeping with ministry regulations.

The package aims to keep the cost of rescuing the banks from sinking the Spanish government's finances and forcing it to demand a bailout of its own.

The Euro 39.5 billion figure includes Euro 37 billion in loans for four banks already nationalised by the Spanish government .

Under the deal, Bankia will get Euro 18 billion, Catalunya Caixa Euro 9 billion, Novagalicia Euro 5.5 billion and Valencia Bank Euro 4.5 billion.

In return, the banks must reduce the size of their business by 60 per cent, branch numbers by 50 per cent, stop lending to real estate development and concentrate on retail loans and credit to small and medium-sized companies.

Bankia, which is based in Madrid and is one of the country's main lenders, plans to shed some 6,000 workers.

The remaining Euro 2.5 billion will help Spain's recently set up bad bank, called Sareb, that is charged with buying soured investments from other lenders.

Another four banks - Mare Nostrum, Banco Caja 3, Liberbank and Ceiss - deemed not fully capable of surviving a serious economic downturn are due to present restructuring plans before December 20 so they can receive Euro 1.5 billion more from the rescue fund.

Spain is battling to emerge from its second recession in three years, with unemployment now over 25 per cent.

The conservative government's policies have triggered protests by nearly every sector of society in recent months. On Wednesday, judges and other members of the legal profession staged one-hour rallies outside courts and ministerial buildings across the country to protest a Justice reform they claim increases their workload, reduces benefits and raises the cost of filing appeals.

Prime Minister Mariano Rajoy's government maintains it has no choice but to implement the measures to reduce the bloated deficit and avoid a bailout.

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