Sep 3, 2012 / 7:38 am
Spain's ailing banks won't likely need to tap all the €100 billion ($124 billion) that's been made available by the country's euro partners, Economy Minister Luis de Guindos said Monday.
In a further indication that Spain's economic problems are not as acute as some in the markets have been fearing, De Guindos also insisted that no additional austerity measures will be needed to meet the Spanish government's deficit-reduction target. Spain is battling to avoid the same bailout fate as Greece, Ireland, Portugal and Cyprus.
However, De Guindos said Spain's most troubled bank, Bankia, will get urgent aid, while two indebted Spanish regions appealed for emergency funding to deal with a crippling liquidity crunch.
Spain's banks have an estimated €184 billion in problematic real estate loans and investments following the collapse of the country's property market in 2008. The other 16 eurozone countries have set aside the rescue package to help troubled Spanish lenders.
"In principle, it looks like not all of (the €100 billion) will be used," De Guindos told Onda Cero radio.
De Guindos said austerity policies being enacted by the government will be enough for Spain to meet its target of reducing the budget deficit to 6.3 per cent of national income this year from 9 per cent last.
The government has already unveiled a €65 billion package of tax hikes and spending cuts.
"Spain has already set out a path which is sufficient for the problems we face," De Guindos said.
He said he didn't expect other eurozone countries to demand more economic reforms in Spain.
Spain is in a double-dip recession with a near 25 per cent unemployment rate.
Investors fearing Spain may not be able to pay off its debts have charged high prices for loans to the country.
That's piled the pressure on Spain to reduce its swollen deficit, cut central and regional government spending and clean up its banking system.
Geir Moulson in Berlin contributed to this story. Hatton contributed from Lisbon, Portugal.
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