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Spain: No request for bailout, says minister Spain: No request for bailout, says minister
(about 3 hours later)
Spain's economy minister has dampened speculation that the country is about to seek a bailout of its bank sector.Spain's economy minister has dampened speculation that the country is about to seek a bailout of its bank sector.
Luis de Guindos said no decision would be made until audits of the banks were completed, possibly by the end of June.Luis de Guindos said no decision would be made until audits of the banks were completed, possibly by the end of June.
There have been reports in the past few days that Spain was seeking an immediate bailout from eurozone funds.There have been reports in the past few days that Spain was seeking an immediate bailout from eurozone funds.
Mr de Guindos was speaking in Brussels, where plans have been published that aim to ensure that taxpayers do not have to fund future bailouts of banks.Mr de Guindos was speaking in Brussels, where plans have been published that aim to ensure that taxpayers do not have to fund future bailouts of banks.
Road mapRoad map
An IMF audit of Spain's banks is due next week, with further independent reports completed about two weeks after, Mr de Guindos said.An IMF audit of Spain's banks is due next week, with further independent reports completed about two weeks after, Mr de Guindos said.
"I have absolutely not discussed any intervention in Spain's banks today," Mr de Guindos told reporters on the sidelines of meetings in Brussels."I have absolutely not discussed any intervention in Spain's banks today," Mr de Guindos told reporters on the sidelines of meetings in Brussels.
Asked if Spain was preparing a request for EU aid, he said: "We are not preparing anything... we have a road map."Asked if Spain was preparing a request for EU aid, he said: "We are not preparing anything... we have a road map."
Madrid is desperate to avoid having to ask for a formal bailout from the EU, which would come with strict political and economic conditions, something of a national humiliation.
The comments helped to lift shares on the Madrid stock exchange, but speculation remains that Spain's bank sector is too weak to escape an eventual bailout. But Spain has admitted that, because of its banking crisis, it is close to the point where it can no longer afford to borrow money on the international markets. So it is seeking funds which can be injected directly into the banking system.
On Tuesday, Spain's finance minister said the credit markets were "effectively shut" to his country, inflaming worries that the country would be forced to join Greece, Portugal and Ireland and seek outside help. The European Commission says urgent measures need to be taken, but it has also published longer term proposals designed to protect governments from paying for the failure of banks in the future.
These measures - the immediate ones and the longer term ones - depend to a large degree on the agreement of Europe's most powerful economy, Germany, and its most powerful politician, Angela Merkel.
Everyone from Barack Obama to David Cameron to Mario Draghi may be putting pressure on her to act, and act decisively. But the German chancellor has been extremely consistent since the start of the eurozone crisis, saying solutions have to come one step at a time, there is no magic wand.
To many it seems an increasingly high risk strategy. But there is not much sign so far that she is about to change course.
With investors demanding higher returns to lend money to Spain, its finance minister said the credit markets were "effectively shut" to his country, inflaming worries that the country would be forced to join Greece, Portugal and Ireland and seek outside help.
Spain has to find at least 80bn euros ($100bn; £65bn) to strengthen its banks' capital buffers.Spain has to find at least 80bn euros ($100bn; £65bn) to strengthen its banks' capital buffers.
A key test will come on Thursday, with Spain due to auction up to 2bn euros of bonds.A key test will come on Thursday, with Spain due to auction up to 2bn euros of bonds.
'Urgency''Urgency'
Spain is keen to avoid having to ask for a European Union bailout as this would come with strict conditions.Spain is keen to avoid having to ask for a European Union bailout as this would come with strict conditions.
It is instead seeking funds which could be injected directly into the banking system. Reports suggest EU officials are looking at how this could happen. It is instead seeking funds which could be injected directly into the banking system.
The deepening eurozone crisis was discussed by UK Prime Minister David Cameron and US President Barack Obama on the telephone last night. Reports suggesting EU officials are looking at how this could happen contributed to a rally on European markets late in the afternoon.
UK Prime Minister David Cameron and US President Barack Obama kept up pressure on European leaders, calling for an "immediate plan" to restore confidence, after the two men spoken on the telephone last night.
The prime minister is due to meet German Chancellor Angela Merkel on Thursday to discuss the issues.The prime minister is due to meet German Chancellor Angela Merkel on Thursday to discuss the issues.
The European Central Bank appeared unlikely to take any immediate action to provide further financial support, despite president Mario Draghi acknowledging the seriousness of the eurozone's crisis.The European Central Bank appeared unlikely to take any immediate action to provide further financial support, despite president Mario Draghi acknowledging the seriousness of the eurozone's crisis.
After the ECB left interest rates unchanged at 1% on Wednesday, Mr Draghi suggested that further monetary policy was not the answer.After the ECB left interest rates unchanged at 1% on Wednesday, Mr Draghi suggested that further monetary policy was not the answer.
The ECB has provided 1 trillion euros for the banking system with two re-financing operations, or LTROs, designed to ease borrowing costs.The ECB has provided 1 trillion euros for the banking system with two re-financing operations, or LTROs, designed to ease borrowing costs.
Despite signs that borrowing costs are once again rising sharply, Mr Draghi said: "The issue now is whether these LTROs would actually be effective. Some of these problems in the euro area have nothing to do with monetary policy... and I don't think it would be right for monetary policy to fill other institutions' lack of action."Despite signs that borrowing costs are once again rising sharply, Mr Draghi said: "The issue now is whether these LTROs would actually be effective. Some of these problems in the euro area have nothing to do with monetary policy... and I don't think it would be right for monetary policy to fill other institutions' lack of action."
'Serious situation''Serious situation'
On Wednesday, the European Commission unveiled proposals designed to stop taxpayers' money being used to bail out failed banks.On Wednesday, the European Commission unveiled proposals designed to stop taxpayers' money being used to bail out failed banks.
The aim is to ensure losses are borne by bank shareholders and creditors and minimise costs for taxpayers.The aim is to ensure losses are borne by bank shareholders and creditors and minimise costs for taxpayers.
However, new legislation is unlikely to come into force before 2014 at the earliest, too late to protect taxpayers from any further immediate bank failures.However, new legislation is unlikely to come into force before 2014 at the earliest, too late to protect taxpayers from any further immediate bank failures.
"The proposal we have today may be only useful for the future but it does not solve the current problems we face," said Sharon Bowles, chair of the European Parliament's economic and finance committee."The proposal we have today may be only useful for the future but it does not solve the current problems we face," said Sharon Bowles, chair of the European Parliament's economic and finance committee.
There would be new requirements for countries to prepare for a bank collapse, collecting money through an annual levy on banks that would be used to provide emergency loans or guarantees.There would be new requirements for countries to prepare for a bank collapse, collecting money through an annual levy on banks that would be used to provide emergency loans or guarantees.
The European Commission plans involve drawing up a EU-wide framework that would allow:The European Commission plans involve drawing up a EU-wide framework that would allow:
  • Financial regulators to be more "intrusive" in the running of banks as firms' stability worsens
  • Forcing banks to draw up explicit "recovery" and "resolution" plans in the event of their finances deteriorating
  • Countries to enforce the sale of all or a part of failed banks, overriding the rights of shareholders or creditors
  • Appointment of a "special manager" at a bank to "restore its financial situation"
  • Laying the foundations for an "increasingly integrated EU-level oversight of cross-border entities"
  • Financial regulators to be more "intrusive" in the running of banks as firms' stability worsens
  • Forcing banks to draw up explicit "recovery" and "resolution" plans in the event of their finances deteriorating
  • Countries to enforce the sale of all or a part of failed banks, overriding the rights of shareholders or creditors
  • Appointment of a "special manager" at a bank to "restore its financial situation"
  • Laying the foundations for an "increasingly integrated EU-level oversight of cross-border entities"
The changes form part of commitments agreed by the leaders of the G20 group of major economies in September 2009.The changes form part of commitments agreed by the leaders of the G20 group of major economies in September 2009.
Michel Barnier, the commissioner who unveiled the plans, said: "We must equip public authorities so that they can deal adequately with future bank crises. Otherwise citizens will once again be left to pay the bill, while the rescued banks continue as before knowing that they will be bailed out again."Michel Barnier, the commissioner who unveiled the plans, said: "We must equip public authorities so that they can deal adequately with future bank crises. Otherwise citizens will once again be left to pay the bill, while the rescued banks continue as before knowing that they will be bailed out again."
If it wins the backing of EU countries and the European Parliament, the law would mark a step in the direction of the banking union supported by European Central Bank president Mario Draghi.If it wins the backing of EU countries and the European Parliament, the law would mark a step in the direction of the banking union supported by European Central Bank president Mario Draghi.
Are you in Spain or any other European country affected? What measures do you hope to see taken to ease pressure on your country's economy? How have you been affected by the economic situation? Send us your comments using the form below.Are you in Spain or any other European country affected? What measures do you hope to see taken to ease pressure on your country's economy? How have you been affected by the economic situation? Send us your comments using the form below.