Critical Analysis: European Union Economic Position – Spanish Bailout

As the world market continues to struggle, Spanish Officials refuse aid for a possible bank bailout.  Spain’s Economy Minister, Luis de Guindos, spoke in Brussels regarding Spain’s economic position.  In responding to recent reports that Spain would be seeking a bailout for its banks, Mr. de Guindos stated, “I have absolutely not discussed any intervention in Spain’s banks today,” referring to the meeting in Brussels.  Responding to whether Spain would seek a future bailout from the EU, Mr. de Guindos said, “We are not preparing anything . . . we have a road map.”  While the Spanish Economy Minister’s comments bolstered the EU market, many speculators believe that a Spanish bailout is necessary and imminent.

Following the Spanish housing bubble of 2009, many Spanish banking institutions struggle to recover from their bad loans.  Currently, the Spanish banking sector is thought to need roughly between €50 and €100 billion from the EU.  However, Spanish officials are refusing to accept bailout conditions and, rather, seek to have any bailout money given directly to the Spanish banking sector.  As the Financial Times Deutschland wrote, “For months, the Spanish government has refused to make use of the bailout funds. Meanwhile, it has cried out ever more loudly for help. Apparently, the government believes that in their great distress they will be able to bypass the rules and still be helped out of the crisis. That may have to happen if the entire euro zone falls deeper into the abyss.”

Regardless, many EU member countries are ready to lend aid.  French Finance Minister, Pierre Moscovici, said at a Paris press conference that, “If Spain desires, we in the euro zone can mobilize rapidly.”   Additionally, EU members are confident that reasonable bailout conditions will be placed for the betterment of the EU.  Holger Schmiedeg, chief economist at Berenberg bank in London, predicts Europe, “will not impose onerous additional conditions on Spain,” and, “Once Spain has been granted 50 billion euros to recapitalize its domestic banks, the Spanish sovereign will be able to fund itself on the market again at bearable interest rates.”  Despite Spain’s reasoning behind its refusal to accept EU bailout money, the EU is in agreement that a necessary and imminent Spanish bailout needs to occur for the betterment of European market.

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