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Was Spain

  • 11 June 2012

After holding a conference call on Saturday, eurozone finance ministers agreed to rescue Madrid's ailing banks to the tune of 100bn euros ($125bn; £80bn).

Rajoy, speaking for the first time since the bailout was agreed said: "Yesterday was a victory for the credibility of the euro, yesterday was a victory for the European Union, and yesterday was a victory for the possibility that Spain quickly recovers the levels of credit necessary to improve investment and employment."

Nevertheless, whatever Mariano Rajoy or the IMF might say, the deal that was announced on Saturday evening will not be enough, but instead opens up many more questions – for policymakers in Madrid, for Spanish voters, for the country's banks and for the euro, writes The Guardian. The article says the only thing that is absolutely certain is that the PM's acceptance of a €100bn credit line marks a new phase in the euro crisis.

"First, it confirms that the scale of the problem is far bigger than previously suggested: Spain's economy is almost twice as big as the three other countries that are already in the euro bailout ward. Second, Madrid can't be dismissed as a spendthrift administration along the lines of Lisbon or Athens."

"The more one looks at this bailout – which doesn't seriously address the restructuring of Spain's banks – the more it seems an unwitting invitation to speculate on which other eurozone members might soon be in the markets' firing line."

In addition, if Spain has succeeded in persuading Berlin and Brussels to hand over the 100bn euros with no strings attached that relate to Spain's spending and taxing (its budget) then Ireland would have a powerful case for demanding a renegotiation of its bailout package, argues the BBC's Robert Peston.

Here's why: "if it hadn't been for the reckless lending by Ireland's banks, Ireland would not need to have been rescued; in that sense, its plight is identical to Spain's; yet the rescue it received undermined the budget-making autonomy, the fiscal sovereignty, of the Irish government, in the way that the Spanish rescue will not do."

And even the Spaniards themselves were skeptical about whether the plan will work. For instance, Lourdes Jimenez, a 37-year-old business owner who watched Rajoy's press conference from a hospital waiting room, doubted the deal will free up credit for small firms which have been choked for years as the banks try to recover from the property bust.

"This is all a whitewash. And meanwhile the banks continue to asphyxiate small businesses, buying government bonds instead of lending to us," Jimenez said.

Still, markets seemed to welcome the move. The FSTE 100 opened up 1.85%, Madrid's IBEX 35 was up 4.5%, while shares of the Spanish lender Bankia – which would benefit from the bailout – rose 18.5% in early trading.

 

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