Well, nearly. Firstly, this is just the first tranche of up to €100bn that may be made available to Spain’s banks. Independent auditors reckon that the sector will need around €62bn to get back on the straight and narrow, but a whole other set of bean-counters have been dispatched to double-check their workings out. A revised figure will be published in September.
Till then, Spain will have to make do with €30bn. Oh, and that’s only if the finance ministers can convince their respective parliaments that it’s definitely a good idea. They’ll need to talk fast: the final loan agreement needs to be signed on or around July 20 with the cash landing in Spain shortly after.
Spain isn’t getting off easy with this deal. Madrid is going to have to bring its public finances into line with EU guidelines. Prime Minister Mariano Rajoy is also going to have come up with yet more aggressive cost-cutting measures to cut Spain’s deficit (to the tune of some €10bn). And Spain’s banks will have more hoops to jump through than Pudsey the dog: ‘There will be specific conditions for specific banks, and the supervision of the financial sector overall will be strengthened,’ said EuroGroup President Jean-Claude Juncker in dire tones. Juncker, incidentally, has now been reappointed chairman for another two and a half years.
Luckily for Rajoy, the eurozone finance ministers have agreed to extend the 2013 deadline for Spain to meet its budget deficit to 2014. The idea that Spain could reach the EU limit of 3% in just six months was somewhat ambitious, after all…
The other big decision to come out of the marathon nine-hour meeting was the creation of a single European banking supervisor, to be formally set up next year. Once this position is in place, Spanish banks can be directly recapitalised from the eurozone rescue fund without requiring a state guarantee. This is great for Spain, less great for countries like Germany – the creditors, if you will.
All in all, it’s a fairly decent showing for two day’s work. Is it enough to shore up Spain’s finances and decrease its chances of needing a full bailout? MT wouldn’t like to say. But at least action has replaced words in this chapter of the eurozone saga.