EU Comm: Deficit Impact Of Spain Aid Seen Offset By Banks
BRUSSELS (MNI) – The impact of Eurozone loans to Spain on the
country’s debt burden could be offset by the interest the government
charges troubled banks for assistance, the European Commission said on
“It is premature to draw conclusions, but based on previous
experiences, it is logical to think that the interest will have an
impact on the deficit, but this is only one part of the equation,” a
Spokesman for the Commission explained.
Under the broad outlines of the aid agreement, up to E100 billion
from the EU’s bailout funds, the European Financial Stability Facility
and the European Stability Mechanism, would be lent to Spain’s bank
restructuring agency, FROB, which would use the funds to help
recapitalize troubled banks.
The FROB is expected to lend the money to the banks at an interest
rate that would “probably be quite a bit higher” which means that “in
time this would compensate for the other interest charge”, the spokesman
EU statistics authorities say it is too early to give a clear
answer on how aid from the Eurzone’s bailout funds would affect Spain’s
debt burden because details such as how much aid will eventually be
extended, how much interest will be charged, and the structure of the
assistance are still unknown.
Markets have not been reassured by the Eurozone’s plan to aid
Spanish banks because of concerns about the impact it would have on
Spain’s indebtedness and because aid channeled through one of the
bailout funds, the ESM, would have seniority over the claims of the
country’s existing creditors.
The Commission spokesman said that risk aversion spreading from
concerns about Greece, which this weekend will hold elections that could
bring to power parties opposed to the country’s bailout deal, was also
partly to blame for the recent rise in Spanish government bond spreads.
Spain has yet to formally request aid but is expected to do so
before the end of June, although “there is no deadline,” spokesman said.
–Brussels newsroom: +324-9522-8374; firstname.lastname@example.org
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