The Slovenia Times

Govt Approves Loan Guarantees for Spain


The conditions for the drawing of funds from the European Financial Stability Facility (EFSF) will concern the financial sector and will include requirements for both individual banks in line with EU state aid rules and for the whole banking system.

Spain will also be required to meet commitments as part of the excessive deficit procedure and act on recommendations for the tackling of macroeconomic imbalances, a press release from the government reads.

The turmoil in the Spanish banking sector was primarily caused by the burst of the real estate bubble and its ramifications in the construction sector as well as the ensuing recession.

Several Spanish banks have accumulated toxic assets, which in turn provoked tensions on the financial markets as investors are concerned about the banks' ability to survive.

The Spanish authorities have adopted several measures to tackle the difficulties in the banking sector, including the operation to clean up banks' balance sheets, a rise in minimum capital requirements, restructuring the deposit banking sector and a substantial increase in provisions for real estate loans.

Eurozone ministers reached a tentative agreement on the bailout package for Spain on 9 July under which Spain would first be offered EUR 30bn from the EFSF to be used as aid to banks in urgent cases. Slovenia's share would be EUR 175m in loan guarantees.

A key condition for the step is the vote in the German parliament, which is expected to approve the bailout package later today.


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