Spain will be under ‘troika’ supervision
MADRID/BERLIN — Spain faces supervision by international lenders after a bailout for its banks agreed at the weekend, EU and German of cials said yesterday, contradicting Prime Minister Mariano Rajoy who had insisted the cash came without such strings.
Financial markets responded with relief to Saturday's euro zone deal to lend Madrid up to 100 billion euros ($125 billion) to recapitalise debt-laden banks, with investors scooping up battered - nancial shares. The euro and European stocks jumped, with the Madrid stock exchange opening up 5.3 per cent and the euro zone STOXX banking index rising 4.5 per cent in early trade.
Spanish and Italian bond yields fell after the deal eased fears of a run on Spanish banks. But previous "bailout bounces" on nancial markets have been short-lived, often zzling within a day or two as investors anticipate the next are-up in the euro zone's unresolved debt crisis.
Greece's general election next Sunday could rapidly change market sentiment if radical leftists hostile to the austerity terms of Athens' EU/IMF bailout outpoll the mainstream conservative and centre-left parties that signed the deal, or the vote ends in another deadlock.
Rajoy said on Sunday Madrid had scored a victory by securing aid from euro zone
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partners without having to submit to a full state rescue programme, saying Spain's rescue had "nothing to do" with the procedures imposed on Greece, Ireland and Portugal.
But EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a "troika" of the International Monetary Fund, the European Commission and the European Central Bank would oversee the nancial assistance.
"Of course there will be conditions," Almunia told Spain's Cadena Ser radio. "Whoever gives money never gives it away for free."
The IMF would be fully involved in monitoring Spain's programme even though it was not contributing funds, and banks that received aid must present a restructuring plan, he said.
Schaeuble told Deutschlandfunk radio: "The Spanish state is taking the loans, Spain will be responsible for them... There will likewise be a troika. There will of course be supervision to ensure that the programme is being complied with, but this refers only to the restructuring of the banks."
Spanish state nances are already under European Commission surveillance under the EU's excessive de cit procedure.
Dutch Finance Minister Jan Kees de Jager said in a letter to parliament that the loans would add to Spain's public debt, and he had insisted on full IMF involvement.
The Spanish government said it would stick to this year's borrowing programme on nancial markets. Spain still needs to re nance 82.5 billion euros of debt maturing by the end of the year, with a big hump at the end of October, and the autonomous regions have a further 15.7 billion euros of debt maturing in the second half of 2012. The central government and the regions also have to fund a de cit of about 52 billion euros this year. — Reuters