International

Reports Swirl That Spain Will Seek Bailout

The Banco de Espana (Bank of Spain) in Madrid. i i

hide captionThe Banco de Espana (Bank of Spain) in Madrid.

Dominique Faget /AFP/Getty Images
The Banco de Espana (Bank of Spain) in Madrid.

The Banco de Espana (Bank of Spain) in Madrid.

Dominique Faget /AFP/Getty Images

One day after seeing its sovereign debt downgraded to just above junk status, Spain is dealing with reports that it's about to ask the other eurozone nations for help in bailing out its beleaguered banks.

As The Guardian writes:

"Spain is expected to request a bailout over the weekend, according to EU sources. The request would follow a conference call of eurozone finance ministers on Saturday. 'The announcement is expected for Saturday afternoon,' an EU official told Reuters."

Reuters adds that "four senior EU officials said finance ministers of the 17-nation single currency area would hold a conference call on Saturday to discuss a Spanish request for an aid package, although no figure had yet been set."

The official word from the Spanish government, though, is that it doesn't know of any such steps being planned. Agence France Presse reports that:

"A Spanish economy ministry spokeswoman, however, denied knowledge of any weekend conference call among Eurogroup policymakers to discuss a Spanish banking bailout request. 'I am not aware of such a conference,' the spokeswoman said. She declined to make any comment about a possible rescue."

According to AFP, if a rescue effort is launched, "the EFSF, a bailout fund set up by the European Union in 2010, would issue bonds and deliver them to Spain's state-backed bank restructuring vehicle, the FROB. ... The FROB could then inject the bonds into troubled banks, which could sell them to raise capital."

Solving the ongoing financial crises in Europe, of course, is important elsewhere because ailing economies there are another drag on the rest of the world.

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