Spain is expected to ask the euro zone for help with recapitalizing its banks this weekend, sources said yesterday, becoming the fourth country to seek aid since Europe’s debt crisis began.
Senior European Union and German officials said deputy finance ministers from the single-currency area would hold a conference call today to discuss a Spanish request for aid, although no figure for the assistance has yet been fixed.
Later the Eurogroup, which consists of the euro zone’s 17 finance ministers, will hold a separate call to discuss approving the request, the sources said.
Spain needs about $50 billion in extra capital injected into several banks to allow them to withstand severe economic conditions, the International Monetary Fund said yesterday.
On Thursday, Fitch cut Madrid’s sovereign credit rating by three notches to BBB, underlining the Spanish banking sector’s exposure to bad property loans and to contagion from Greece’s crisis.
“The government of Spain has realized the seriousness of their problem,” a senior German official said.
He added that an agreement needed to be reached before a Greek election on June 17, which could cause market panic and increase the threat of Athens leaving the euro zone if left-wing parties opposed to Greece’s EU/IMF bailout win.
The euro zone has been under strong pressure to take swift action to prevent the debt crisis from spreading.
debt crisis, European Union, Spain, International Monetary Fund, German officials, finance ministers
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