Spain is urged to come clean on bailout plan

MADRID — The European Union urged Spain on Thursday to come clean on how it plans to finance the overhaul of its banking sector, warning that uncertainty over this has contributed the recent market turmoil and the country’s soaring borrowing costs.

A European Commission spokesman, Amadeu Altafaj, told Spanish National Radio that the conservative government in Madrid needed to spell out quickly how it plans to finance the recapitalization of troubled lender Bankia SA and whether there are other banks burdened by toxic real estate assets that might need assistance.

The government nationalized Bankia earlier this month, and the 19 billion euro ($23.6 billion) in public money that will need to be injected is more than twice what the government had estimated.

Doubts over how recessionhit Spain will handle the bailout have sparked concerns that the country itself will soon follow Greece, Portugal and Ireland in asking for financial assistance. Spain’s borrowing costs on the international debt markets — a sign of investor confidence in how well it can pay off its debt — have hit worrying levels while its stock prices have been taking a pounding.

“No one can expect that, with these negative results of some banks, the markets can react with euphoria,” Altafaj said.

Spain’s deputy prime minister was headed to Washington to discuss the economic crisis with the U. S. Treasury Secretary Tim Geithner and Christine Lagarde, the head of the International Monetary Fund, which has been involved in all previous sovereign bailouts in Europe.

Altafaj said it would be best if the Spanish government turned to capital markets to finance the cleanup of Bankia, the country’s fourth largest bank, but stressed that if it is going to need external money it should say so soon.

“What you cannot do is maintain this uncertainty, which is what is dragging down market confidence,” the spokesman said.