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Paul Hanna / Reuters
Spain's economic crisis includes protests like this one in Madrid on Friday, where people rallied against layoffs at Banesto bank.
Spain will seek financial help from its Eurozone partners but exactly how much won't be known until private audits are undertaken, the country's economy minister announced Saturday.
Earlier, European finance ministers discussed plans to offer Spain up to $125 billion (100 billion euros) in a bid to stabilize its banks -- and ease concerns over the even bigger European debt crisis. That amount was described as an upper limit, not an indication of what Spain would ask for.
After Spain's announcement, the Eurozone ministers issued a statement that they expected a formal request "shortly" and are "willing to respond favorably."
Spain earlier said it wanted to wait for two independent audits — due by June 21 — before deciding on whether to seek aid, and it was not clear if those audits were being stepped up.
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Spain had resisted asking for a bailout since previous ones for Greece, Ireland and Portugal came with demands for tax increases and spending cuts.
Economy Minister Luis de Guindos emphasized the aid would not come with "micro-economic conditions".
U.S. Treasury Secretary Tim Geithner issued a statement praising the "concrete steps on the path to financial union" for the Eurozone.
Investors and politicians have been increasingly concerned that Spain might not be able to find the money to prop its ailing banks by itself.
Spain warns time is short as G7 discusses eurozone crisis
A report from the International Monetary Fund estimated Spanish banks need a recapitalization injection of at least $50 billion following a stress test it performed on the country's financial sector. That report came out early Saturday, three days ahead of schedule, underscoring the urgency of the situation.
Officials said there had been a heated debate over the IMF's role in Spain's bank rescue, which Madrid wanted kept to a minimum. It will not provide any of the money.
In the end it was agreed that the IMF would help monitor reforms in Spain's banking sector, while EU institutions would ensure Spain stuck to its broader economic commitments.
Eurozone policymakers were eager to shore up Spain's position before June 17 elections that could push Greece closer to a Eurozone exit and unleash a wave of contagion.
Nonetheless, some analysts said financial markets might be calmed by the announcement when they reopen on Monday.
"The figure of up to 100 billion (euros) is more encouraging and pretty realistic; it's an attempt to cap the problem," said Edmund Shing, European head of equity strategy at Barclays.
"The issue, however, is there is still a lack of detail about where the money's coming from, which is crucial. The market will treat it with some caution until they see how it will be funded."
World Bank on Greece crisis: Spain and Italy could be next
The Eurogroup said the funds could come from either from a temporary rescue fund, the EFSF, or the permanent mechanism, the ESM, which is due to start next month. Finland said that if money came from the EFSF, it would want collateral.
EU sources said there was a preference to channel money to Spain through the ESM, rather than the EFSF. Under the ESM, an approval rate of 90 percent or less is needed to trigger aid, and the fund also has more flexibility in how it operates.
"That's why it's so important that the ESM ... be ratified quickly," German Finance Minister Wolfgang Schaeuble said.
Spain has already spent $20 billion bailing out small regional savings banks that lent recklessly to property developers.
Spain's biggest failed bank, Bankia, will cost $25 billion to rescue and its shareholders have been wiped out.
The race to resolve the banks' troubles comes after Fitch Ratings cut Spain's sovereign credit rating by three notches to BBB, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis.
It said the cost to the Spanish state of recapitalizing banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between $75-$125 billion. The higher figure would be in a stress scenario equivalent to Ireland's bank crash.
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Italy could yet get dragged in too. Its industry minister, Corrado Passera, said the economic situation in Italy had improved since the end of 2011, but remained critical. "Europe was more disappointing than we had expected, it was less capable of tackling a relatively minor problem such as Greece," Passera told a conference.
While Spain would join Greece, Ireland and Portugal in receiving a European financial rescue, officials said the aid would be focused only on its banking sector, without taking the Spanish state out of credit markets.
That would be crucial to avoid overstraining the Eurozone's rescue funds, which would struggle to cover Spanish government borrowing needs for the next three years plus possible additional assistance for Portugal and Ireland.
Conditions in the plan would be related to the banks and would probably not add to the austerity measures and structural economic reforms that Spain's government has already put in place, EU and German sources said.
A "bailout lite" would help salvage Spanish pride. Spain is the world's 12th largest economy and No. 4 in the Eurozone. EU and German officials have cited national pride as a barrier to requesting a full assistance program.
The Associated Press and Reuters contributed to this report.
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Europe has had problems for a long time. I have had dealings with Spanish owned companies. They only care about money...not worker safety or anything but MONEY. The only answer to this crisis is to cut management payroll (funds) and rely on the "underlings" to make money. The sad fact is that it is the LOWER and MIDDLE people on the totem pole who actually make money for the companies. Everyone else should get their hands dirty (LOL) or resign. The remainder need to work to make a company profitable without disrupting the companies finances.
In other words execs...roll your sleeves up and do what you were REALLY hired to do.
Thank you for getting the discussion back on track with intelligence and common sense! This whole economic mess has trickled down from the top, not trickled up from the bottom, actually i should say flooded not trickled. As such the responsibility of both bearing and fixing this economic mess lies with those at the top. A person working in retail for instance, has absolutely nothing to do with creating this economic mess.
Hehe....wasn't Spain the economy Obama used an example to strive for when he was running for office?
The shadowy provider calls Gabriele "the usual scapegoat" and says his or her intention is to "drive out the real culprits from the Vatican,".// Fear not sheep ! The real culprits in the Vatican uhuh are in charge I would assume and the shadow knows ! If Gabriele is the usual scape goat then who is the goat herder ? How do they come up with this stuff.the shadowy provider come on now who could that be ?
The time for finger pointing is over. Now, we need to fix the problem and the only way to do that is to raise revenue and cut programs. Those who have the resources (money) need to pony up and pay their share of the burden. I have lost my job because of lack of funding. I am still willing to have my taxes bumped up a bit to help in the effort to save our way of living. My only income is Social Security which I have paid into for the past 50 years. We cannot cut our way to prosperity!
We certainly cannot spend 1 1/2 trillion/yr in the red and talk about prosperity. If the Democrats are in power, they would spend the extra income without cutting anything. We would have more of a deficit per year with new income!
There is no reason for spain and the other socialistic countries to not raise taxes to fix their problems, the problesm were created because the people wanted the easier union route and now should have to pay for it.
That theory doesnt hold true to the US, 90% of the country didnt choose the union route and yet we are expected to pay for its socialism and the dem socialism of paying for non-workers to get benefits that the workers dont get themselves.
Europe made their own bed and now they have to lie in it, the majority citizens of the US didnt, and we shouldnt have to pay for the same liberal policies that bankrupted europe.
Your lives are over as you've known them. Welcome to slavery; you are now a slave of the bankers and their puppet politicians. Banks have been socialist organizations forever. They never were capitalist organizations. If they make money, they keep it. If they lose money, they steal from us. What a nice position to be in, huh? If you think Obama started this, you're an idiot.
So Spain want's the money but with NO conditions. I say Peace on them. If there are no conditions they will go back to their failed policies and then in a year or so ask for More money. Peace on them, give them nothing.
Spain will need enough money to cover the expense of their king's elephant hunting safari to Africa, plus enough to pay his medical bills for getting a broken hip while on safari, plus the emergency flight home and his TV appearance to apologize for wasting all that cash. It's good to be the king.
Now I know for sure that the Europeans are plain stupid. Spain will never recover because of its completely corrupt ways and will fail over and over again. Just stupid! Spain is trash!
Bailouts, bailouts, print worthless money, put debt on long-term credit and the interest alone will kill ya. Pull up our almost 17 (now) trillion debt and watch the interest alone build so fast it'll make your head spin...
All these phony delay tactics reminds me of a Stooges clip. The boys are in a boat...Moe goes to smash a landed fish with a heavy tool...puts hole in bottom of boat. He and Larry start bailing...Curly sees a hand auger ("oh, a water-letter-outter) and starts drilling holes in back of boat to let the water out. Makes about as much sense as what WE and the Euro Stooges are doing.
LOL....... They alway wait till the markets close on Friday to release bad news such as this, and then on he first half if the week they release good news which is later refuted, but not I'll the markets once again close on Friday. Lovely game, is it not?
Latest news on Saturday is that Spain is okay. It's just it's banks that are broke. Well if Spain itself were not broke it would not need outside help to re-capitalize its banks would it?
This is another piece of Euro-fiction which will result in the banks getting the money which is not being termed a "bailout". In this way, the government hopes to avoid a ruinous credit downgrade and high borrowing costs by saying "Oh we're just fine. Our banks need money. That's all. Nothing to see here, folks."
Unfortunately the world is beginning to realize the truth of the matter and it is not a pretty truth. This entire European currency union is collapsing. They can't throw enough borrowed money at it to save it and should not even try. Greece and Portugal have had two bailouts and Ireland has been bailed out and is looking for another. They are sunk as a result of too much debt occasioned by too much borrowing to sustain their unsustainable socialist economies.
Prime Minister Thatcher? The socialists are running out of other people's money as you predicted.
You don't understand the situation in Spain or elsewhere in Europe. The Spanish banks are insolvent because of the decline in their reserve holdings. Most of these banks reserves are Spanish bonds. The reserves have declined because of the decline in these bonds. Spanish bonds have declined because of the huge unemployment caused by government austerity and the EU recession. Because of the uncertainly of the Euro future customers are making a run on European banks to redeploy their assets to the US and Germany. Spain's problems ( or Ireland and Italy) have nothing to do with "socialism", "unions" etc. In fact Spain did all the right things to lower their government debt and the credit downgrades more than offset theirefforts. BTW Germany will see hard times if the Euro is abolished and there will be additional capital flight to the US. In almost every scenariowe are likely to see massive deflation in Europe and China and possibly the US. The dollar will reach record highs if the Euro collapses. As Bill Gross at Pimco observes the US is the cleanest shirt in the laundry.
Oh I understand the situation in Spain very well, Sharky. The situation in Europe can be summed up neatly as a group of countries forming a "currency union" with no political or fiscal underpinnings and with the weaker countries continuing to maintain bloated programs and bureaucracies just as if they had been on solid financial footing all along. A shorter, three word summation would be " failed socialist policies".
Michelle (Mrs. Pimp Daddy) Obama should take another vacation there!!! That would add a few mil. to the economy!!!
I just read a Deloitte article on Spain's tax rates. No wonder their country is going under. Who would want to start a business there? I'll bet jobs have been outsourced big time over there. No wonder unemployment rate is so high. Check out their personal income tax brackets (amounts in Euros):
0 - 17,707 taxed at 24.75%
17,707 - 33,007 taxed at 30%
33,007 - 53,407 taxed at 40%
53,407 - 120,000 taxed at 47%
120,000 - 175,000 taxed at 49%
175,000 - 300,000 taxed at 51%
300,000 - and up taxed at 52%
Their corporate tax rate is 21%. The article also mentions many other taxes the citizens & corps have to pay such as VAT and real estate taxes, and local taxes, etc.
Same thing will happen here with the same results.
These tax rates are way higher than those in the US yet they're in a financial crisis. It's a long shot but maybe it's a spending problem. You listening Obama?
From what I understand, Spain's major problem was similar to ours...overvalued real estate and a housing bubble.
Housing bubbles are a part of the problem but the heart of it all is out of control spending on social programs in every country that's experiencing economic collapse.
Why do you think that? What large social programs have been added recently?
Obamacare comes to mind but it's not so much the new programs as it is the rapid increase of people onto the old programs plus the mismanagement of the programs and the inevitable failure of socialism.
Not sure much of the cost of Obamacare has hit yet...so doubt it is contributing to the national debt much.
Why do you think more and more people are going on the old programs? Which programs are being mismanaged and how? Do you consider programs such as Social Security and Medicare as "socialism?"
Who will bail out the USA?
Who or What............civil war.......its the only logical outcome....first we default(debt is unsustainable and this country has lost its way over 50% of the population on the dole)......no more lending....everything starts shutting down.....everyone for them self......good luck to you and yours.....
That's the Obama plan.
Does anyone really believe that in the end this is going to make one bit of difference?
Debt = slavery
Enjoy your debt......................
Italy come on down....your on deck..........................
breadex...I'm not sure where your info is coming from. CLINTON signed a bill put forth by a republican (graham el.al) to deregulate the banking system. The banks did their thing, stupid people who could not afford their mortgage if interest rates rose (I know, duh, what would you expect from a variable interest rate) did their thing. Neither the republicans who controlled congress until 2006 nor the democrats who controlled congress 2006 and beyond pulled their heads out of their a**es to notice what was coming. Blame goes all the way around, it wasn't just one party, nor were the public at large innocent. But, you firmly have your head in the sand regarding the financial fiasco which is on the horizon. Please pull it our, pay attention, and learn something.
Europe and America need only to see how Estonia got out of their financial mess.
Estonia is doing well. Very low debt to GDP ratio (<10%). But, it's a very small country (1.5 million) and runs trade surpluses with its neighbors. Also, survives at the sufferance of Russia.
Next to China, apparently, the least religious country in the world.
I'd like a piece of that bailout so I don't have to go to work anymore.
-coauthor, "The Suck of Work"
I do'nt understand why social security for seniors who worked, payed taxes and built & defended this country is always being targeted ? It and medicare have been raped & robbed to death by politicians & crooks. This country always targets the people doing all the paddling while making it more comfortable for the do-nothing ones that are just sitting in the boat. We are getting a very crowded boat and less & less paddlers ! We reward welfare addicts & illegals as fast as they can pop out a new baby so they can get back home to thier wide-screen t/v and the paddlers are told its so every-one will feel equal. So do your fair share & give till it hurts so every-one can feel gooood & equal !
It's being targeted now because they have gutted the funds and don't want to pay them back as they promised. In order to keep from paying back the "loan" they borrowed from the Social Security funds they have decided it is not a viable program so it's okay to stiff the program funds they took from it as a "loan."
Don't you wish you could do that to your creditors?
I don't know anyone who isn't getting their checks?
The social security shortfall is pretty much a demographic problem, which can be fixed without significant changes. Medicare is the larger problem.
MEDIDAID is the problem. Pure welfare. It should be ended $400 billion saved federally; Hundreds of billions saved by the States. We cannot buy doctors for everyone.
Medicaid is basically Medicare for poor people under 65? And, it's handled by the State, right? Should the medical providers refuse the services or provide them for free?
Refuse.
So, what are we talking about here? There are two basic arguements. To be or not to be. You can pretty it up with hyperbole and spin the dogma of the technicals to support whatever side you support, however, again and again, economies around the world are coming to a reckoning. How many burned out businesses does it take for you to see the light? At the end of the day, you have a few people holding a few scraps of paper while the rest of society reboots. Do we pacify the few (austerity) or do we fix the problem? The world keeps spinning. To be or not to be.
Austerity isn't the solution to going broke, it's the result OF going broke. Either we stop spending now at $16 trillion or we hit $40 trillion and no one will loan us anything. The difference is now we can ease off, once no one will take our credit, we will hit a brick wall like Greece.
Put another way, is it better to return to sanity when your credit card balance is $16,000 or $40,000 when they cut you off completely?
And Obama wants us to be like Europe.
when did he say that? oh that's right , he didn't. faux news/republican radio said it.
Oh come on, anyone but a complete idiot can see he is patterning the US after socialized EU. Liberals often lament we are the only western nation without socialized medicine.
the real illusion is that china has any money
it has been spending vast sums
and living behind the fascade that it has wealth
when it is all morgaged to the hilt to keep expansion booming.
with a billion and one 1/2 people
most are still in poverty
china is still dirt poor
and lives in a house of cards
that it will pull down on itself
hanging onto tibet ,hunan, taiwan. hong kong and macau.
if these were free they would drive china forward
but china's need to choke the life out of everything
will in the end freeze these economies and kill china.
At least China is not wasting any money in 2 millions vet soldiers with "PTSD" and other kind of issues.
while there may be one china, it has many faces, they are not all the same, they should be free to look different.
money is not wasted on treatment for soldiers with post tramatic stress disorder or other issues
money is wasted giving it to them
although many of the treatments are primative
and will never get to the underlying cause
that one was used uselessly by ones country
and that immense amounts of money
and effort were expended for nothjng
and there was much violence
and many lives were lost
and a great deal of destruction
and that one got terribly ill as a result
and there is no one to talk to about it.
Jon--while I agree with you on much of what you are saying, China has done two things I have to admire: They made an effort to CONTROL the rampant increase in their population, and to a great exted, tho we may not agree with the method, it HAS worked. They are the ONLY country that is overpopulated that is even ATTEMPTING that.
Second, they are trying to figure out a way to bring the 'outlanders', the peasants who live on farms in AWFUL conditions, into a better situation. Not too successfully yet, but they KNOW how easy it is for the "unwashed masses'' to start a revolution and WIN it based on sheer numbers.
My son has lived in China for almost 4 years, went there right out of college (Oklahoma) with no 'life plan' on how to pay for law school, so joined a group who went over to teach English to school kids.
During orientation, one of the Americans asked what they should do about discipline, and got a blank STARE from their Chinese hosts--who finally said "You won't HAVE any discipline problems. These kids WANT to learn, and they know that if they do NOT, there are 1000 other kids who WILL take their place.
Funny how the Chinese recognize how important it is for the future of China for their kids to learn English,(which is pretty widely recognized as THE language of business world-wide) when in this country we tolerate the children of ILLEGALS making NO effort to do so, and their parents not only don't learn it themselves, but also don't DEMAND it of their kids.
Someday, will taxpayers everywhere in the world, realize that their worst enemies are their own governments and the financial institutions at home, and not anybody or anything else.
Their own countries is their right place to "serve" (whatever that means) and punish crooked politicians as well as big banks, and not a third world far away country.
Of course, powerful countries design "austerity plans" in education, but are wasting billions or trillions in senseless overseas operations.
Midnight--have you ever traveled to Europe? My son and I both have, and were both AMAZED at the lackadaisical attitude toward work. Stores close at odd hours, seldom stay open after 6, the whole CONTINENT goes on vacation in August, and could care less about any tourists that might get a poor impression.
As long as the people of Europe BELIEVE they are 'entitled' to retire at 50, get all their health care paid, and never really have to work that hard, then they will keep electing scallywags who promise them they will keep giving them those things EVEN when there is no money.
And when you blame all the worlds economic problems on the banks, just remember that NO ONE forced people to take out loans they had no way to pay back. No one FORCES you to bounce checks. (does ANYONE today keep a check register? a BUDGET for pete's sake? or have a rainy day fund?
Society has become an 'instant gratification' group and wants to blame the banks for them getting in trouble. I knew a woman once who, when she got her paycheck every week, had about 6 envelopes, each with a category such as 'rent' or 'utilities' or food, etc., and she CASHED her check, and divided the money among those envelopes, and would NEVER spend any money for something that it wasn't slated for. Or course, she ALSO put some money into an envelope that was for SAVINGS, so she had backup in an emergency.