eurozone set for emergency talks on spain bank crisis
Last Updated : GMT 15:30:33
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Eurozone set for emergency talks on Spain bank crisis

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Arab Today, arab today Eurozone set for emergency talks on Spain bank crisis

Brussels - AFP

Eurozone finance ministers are to hold an emergency conference call Saturday on an expected request for aid from Spain, the fourth and biggest country to cry for help in Europe\'s two-year debt crisis. The eurozone greenlighted the \"holding of a teleconference of the Eurogroup on Saturday at 4:00 pm to agree a declaration on Spain\'s intention to request aid and the Eurogroup\'s commitment to granting it,\" a European government official said. A statement was likely to be issued later on Saturday. In Madrid, a government spokeswoman said Spain had not changed its position and was not seeking aid, but an EU official said that while Madrid might not have made an official request, \"I can confirm that there will be a conference call.\" Earlier, another official who also asked not to be identified said the 17-member eurozone expected the Spanish aid request \"any time now.\" \"The solution must come quickly,\" Jean-Claude Juncker, the Luxembourg premier who heads the Eurogroup, said in an interview with German radio late on Friday as pressure mounted on reluctant Spain to seek a bailout. German central bank chief Jens Weidmann urged Madrid on Saturday to call on the eurozone\'s temporary financial rescue fund, the EFSF, if needed to bolster the bank\'s balance sheets. \"If Spain feels overwhelmed by its financial needs, it should use the instruments which have been created for that,\" Weidmann said in an interview to appear on Sunday in the Welt am Sonntag.  If Madrid feels it has no option but to ask for help, it would mean the eurozone sovereign debt crisis has defied the authorities\' desperate attempts to contain the need for rescues to Greece, Ireland and Portugal. It would also see the eurozone in uncharted waters -- Spain\'s economy is more than twice the size of Greece\'s, Ireland\'s and Portugal\'s combined. As senior officials from the euro area prepared the nuts and bolts of a Spanish bank bailout, once requested, new IMF stress tests showed that banks in Europe\'s fourth biggest economy need about 40 billion euros ($50 billion) in new capital. International Monetary Fund chief Christine Lagarde on Saturday weighed in to demand a eurozone fix by calling for closer cooperation among the single currency countries. She argued in an interview for a common eurozone debt guarantee which would give \"a clear signal to the markets that Europe has a common plan and its members want to follow it together. \"What is currently undermining efforts to support the euro are the uncertainties and doubts about the long-term view of politicians and whether the eurozone will last,\" Lagarde told the daily Sueddeutsche Zeitung. German Finance Minister Wolfgang Schaeuble told the regional newspaper Passauer Neue Presse meanwhile that the time has come for tighter European integration. \"It\'s clear. We have to attain the next step of political integration in Europe. The crisis is forcing the necessary transformations to take place more quickly,\" he said. The IMF tests showed that while Spain\'s top two banks -- BBVA and Banco Santander -- were solid, the rest of the banking sector was struggling. If the current stress continues \"the largest banks would be sufficiently capitalised to withstand further deterioration, while several banks would need to increase capital buffers by about 40 billion euros\", an IMF statement said on Friday. Speaking on background, an IMF official said the banks would likely need a lot more to ensure there was a \"credible backstop\" in worst-case scenarios. \"In our view the stress tests are a good indicator but they are basically a floor for what you would probably need,\" the official said. Often, the official said, to convince financial markets that banks were strong enough, they would need a cash buffer of 1.5 to two times the level of new capital mandated under the stress test. \"Usually you come up with a buffer ... large enough to convince markets so that people don\'t say, oh well, what if this happens, what if the growth is even worse?\" The stress test results were originally to be released on Monday, but the timetable was moved up as European diplomats said Spain would likely move on Saturday to begin crafting a deal for an EU rescue of its banks. Media reports earlier said Spain could ask for a bank rescue -- estimated by Fitch Ratings at up to 100 billion euros as early as Saturday. US President Barack Obama on Friday urged Europe to act swiftly to fix its banking woes or pay the price. \"In the short term they have got to stabilise their financial system. Part of that is taking clear action as soon as possible to inject capital into weak banks,\" he told reporters. \"Just as important, leaders can lay out a framework and a vision for a stronger eurozone, including deeper collaboration on budgets and banking policy,\" he added.

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