Spain secured a 100 billion euro ($125 billion) bailout from the eurozone late on Saturday night to help their debt-ridden and beleaguered banking system, hours after the country asked for financial aid.
In a joint statement, European Commission President Jose Manuel Barroso and Vice President Oli Rehn, who serves as the 17-nation eurozone currency group’s monetary affairs commissioner, said they “welcome today’s communication by Spain of its intention to request the support of the euro area for the restructuring of its financial sector” and the reciprocal positive response from the eurozone to bail it out.
The bailout is intended to restore investor confidence in the Spanish banking sector and to avert a deepening of the euro crisis.
Spain’s banking system is having problems in part because of bad property loans after its housing market boom fell apart.
“The commission is ready to proceed swiftly with the necessary assessment on the ground, in close liaison” with the International Monetary Fund (IMF), the European Central Bank, and the European Banking Authority, the statement reads.
The IMF originally recommended a 40 billion euro ($50 billion) loan to resurrect Spain’s banking system following crisis talks in Brussels.
Officials with the eurogroup said that it was informed that Spain would present a formal request, according to a statement. Spain has insisted that the bailout is a loan and that it would pay the borrowings back.
The group noted that Spain has made “significant” reforms to its labor markets and implemented measures to strengthen its banks’ capital base, adding that it is “confident” Spain will make good on its commitments to reform even further.
Spanish Prime Minister Mariano Rajoy hailed the loan as a positive step for Spain and the euro currency.
The eurozone’s move saved “the credibility of the euro” and ensured a good future for the currency, he said, according to a statement from his office.
For Spain, it allows for more funds for “households, entrepreneurs, small and medium enterprises, workers, and freelancers” to develop their businesses and create jobs at the same time, he said.
The aid comes at a crucial time for the eurozone, just a week before fresh elections in Greece, which might force the country to exit from the currency group if parties that are against austerity cuts take office.
Greece was forced to call new elections after several of its main parties squabbled over forming a unity government, with some saying that already-voted-in austerity measures should be upheld while others, particularly the far-left Syriza, expressing criticism of the cuts.Greece had approved austerity cuts to secure a further $170 billion bailout from the IMF and eurozone, additional to its earlier loan of $44 billion.
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