Spain bank could get bailout money within weeks

Associated Press
People queue outside an unemployment office in Madrid, Spain, Tuesday, July 3, 2012. The number of people claiming unemployment benefits in Spain went down sharply in June as employers embarked on a hiring spree to prepare for the country's busy summer tourism season. Spain's jobless rate is 52 percent for those under age 25. (AP Photo/Andres Kudacki)
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MADRID (AP) — Spain's ailing banks could get their rescue money within weeks as talks over the terms of their bailout from a European fund are moving swiftly, the economy minister said Tuesday.

Spain will have access to up to €100 billion ($126 billion) in rescue loans from the 17-country eurozone's bailout fund for its banks, many of which were stung by the collapse of a real estate bubble and left holding billions in bad loans and foreclosed property.

The terms — including the amounts and interest rates — are still subject to negotiation, however, and will be announced July 9 at a meeting of eurozone finance ministers.

The Spanish government will take the rescue money and feed it to the banks gradually, rather than in a lump sum, and banks will get different terms depending on their financial condition, Luis de Guindos told a breakfast gathering of business leaders and media.

He said the overall loan, which the government will ultimately be responsible for repaying, will carry favorable interest rates and and repayment schedule.

At first, the money will come from the soon-to-be launched permanent bailout fund, called the ESM, and count as government debt. Eventually, once a single European banking supervisory body is created as agreed at a summit last week, the rescue money will go directly to the banks for recapitalization, not adding to the government's debt load.

De Guindos also had cautious praise for an economic statistics that came out Tuesday: the number of people registered as unemployed in Spain went down sharply in June as employers embarked on a hiring spree to prepare for the country's busy summer tourism season.

Spain's Labor Ministry said the number fell by nearly 99,000 to 4.6 million people. It was the third straight monthly decline.

The ministry said in a statement Tuesday that the decline was the largest drop for June ever recorded.

De Guindos called the number good and said "let's hope it consolidates."

The nation's unemployment rate is released separately and quarterly. It stood at 24.4 percent at the end of March — the highest rate among the 17 nations that use the euro. Spain's jobless rate is 52 percent for those under age 25.

The economy was hit hard by the implosion of a real estate bubble in 2008. That caused property prices to plummet and unemployment to spike as construction jobs dried up.

As concern grew that Spain's public finances may be overwhelmed by the cost of rescuing banks — its budget deficit is almost 9 percent, about three times the EU limit — the government was forced to make painful austerity cuts, such as public sector job cuts. That has helped pushed the economy into its second recession in two years.

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