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Mood Still Nervous as Spain Banks on $125B

MADRID-The Eurogroup has proposed to lend the cash to Spain’s banks, not the government, a positive sign – but signs still point down for the country and Greece’s Sunday election still looms.

By Robert Carr | Updated on June 11, 2012

MADRID-It’s unclear whether the proposed $125 billion loan to Spanish banks, tentatively approved by the Eurogroup on Saturday, will assuage US worries about the health of the Eurozone. The Euro has since lost ground it gained after the announcement, as the fourth bailout of Euro countries will be followed this week by Greek elections, which could ultimately determine if Greece would become the first country to leave the Eurozone.

Mariano Rajoy, prime minister of Spain, said Saturday that he doesn’t consider the mass incentive to be similar to the bailouts that were required for Greece, as the money doesn’t come (yet) with austerity measure requirements attached. Rather, the Eurogroup praised Spain as having already implemented significant fiscal and labor market reforms and measures to strengthen the capital base. “The Eurogroup is confident that Spain will honor its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester,” the body said in a statement. “Progress in these areas will be closely and regularly reviewed also in parallel with the financial assistance.”

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