Spain gets €39bn aid for banking

(AFP Photo / Dominique Faget)
Spain has received a 39.5 billion euros aid package from the European Stability Mechanism to keep the country's banking system afloat.

“The funds from the European Stability Mechanism (ESM) have been received…for the Group One banks," the Spanish Economy Ministry confirmed to Reuters.

The money was transferred to Spain’s own bank bailout fund, the FROB, and then will be disbursed to the banks. Nearly half of that total – 17.96bn euro – will go to Bankia, while 5.43bn euros will be provided to Novagalicia, 9.08 billion euros to CatalunyaCaixa and 4.5 billion euros to Banco de Valencia.

Besides that, the 2.5bn euro will fund the Sareb bank, set up to absorb toxic real-estate assets. The set up of a ‘bad’ bank is expected to simplify monitoring of rescued Spanish banks as their bad assets would be consolidated in a single centrally-administered body.
In exchange for financial aid, the Spanish banks are expected to tighten their belts, including employee lay-offs, which is likely to worsen the situation at the country’s job market which has 25% unemployment. 

In June the eurozone’s finance ministers agreed to provide up to 100 billion euro to recapitalize Spanish banks. Earlier EU leaders agreed their 500bn euro rescue fund would be able to recapitalize troubled banks directly without providing money first to national governments.

Meanwhile independent auditors on Friday revealed the results of a check on Spain's banks saying they would need about 62 billion euros in the worst case scenario

Spanish banking problems has become the major problem for the eurozone finances following Greece as the bursting of the Spanish housing bubble in 2008 created a huge number of bad debts.