Spain expected this weekend to ask help from the Euro zone to bail out its banks
Spain is expected to ask the Euro zone for help with recapitalising its banks this weekend, sources in Brussels and Berlin said on Friday, becoming the fourth country to seek assistance since Europe's debt crisis began.
Five senior EU and German officials said deputy finance ministers from the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid, although no figure for the assistance has yet been fixed.
Later the Euro-group, which consists of the Euro zone's 17 finance ministers, will hold a separate call to discuss approving the request, the sources said.
The announcement is expected for Saturday afternoon, one of the EU officials said.
The dramatic development comes after Fitch Ratings cut Madrid's sovereign credit rating by three notches to BBB on Thursday, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis.
The government of Spain has realised the seriousness of their problem, a senior German official said.
He added that an agreement needed to be reached before a Greek election on June 17 which could cause market panic and increase the threat of Athens leaving the Euro zone if left-wing parties opposed to Greece's EU/IMF bailout win.
Spain's deputy prime minister, Soraya Saenz de Santamaria, said the government needed to have at least a preliminary estimate of how much extra capital the banks needed before taking a decision.
The IMF is expected to announce imminently the results of its own audit. The IMF report says the banks need between 40-80 billion Euros, according to a Spanish newspaper.
It's important to respect the proceedings because it's important to know the ground, she told reporters while not denying that the Euro-group would hold a call on Spain's needs.
Before taking any kind of decision one should at least have a first estimate of the ground and the ground means figures.
European Central Bank Vice President Vitor Constancio said the call for assistance was expected soon.
It is expected that Spain will formulate a request for aid exclusively for banks recapitalisation ... there has to be an expression of will to have such a programme for Spanish banks, and one may hope it happens rather swiftly, Constancio said on Portuguese radio.