Euro zone finance ministers have agreed to lend Spain up to 100 billion euros ($125 billion) to bail out its troubled banks as Madrid officially stated its intention to ask the Eurogroup for help.
"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," a Eurogroup statement said on Saturday.
Spain’s Economy Minister Luis de Guindos earlier said that Madrid would request European financing for the recapitalization of the Spanish banks that need it and specify the amount after independent audits expected to be completed before June 21.
International Monetary Fund’s Managing Director Christine Lagarde said on Saturday that the global lender would support the implementation and monitoring of this financial assistance as the Eurogroup’s plan is consistent with the IMF's estimate of the needs of Spain's banks.
Fitch ratings sharply downgraded Spain's credit rating on Friday, citing the growing banking crisis in the euro zone's fourth-biggest economy.
Spanish government debt was cut by three notches to BBB, above junk in Fitch's ranking scheme, and placed on a negative outlook, meaning the nation remained at risk of a further downgrade.
Fitch said the downgrade reflected higher than expected likely cost of restructuring Spain's troubled banking sector, which is now estimated to be around 60 billion euros ($75 billion), or as much as 100 billion euros "in a more severe stress scenario."
The bailout for Spanish banks would make it the fourth country, after Greece, Ireland, and Portugal, to seek financial assistance since Europe's debt crisis began.
