Post date: Jun 09, 2012 6:39:0 PM
MADRID, SPAIN (REUTERS) - Spain will request aid from its euro zone partners of up to 100 billion euros but not until it has a clearer idea of the amount of capital its banks needs from independent audits due to report in just over a week, EU sources told Reuters on Saturday (June 9).
Spain has seen a long deterioration in its national finances.
Spain indicated during a conference call of the euro zone's 17 finance ministers that it wanted aid for its banks but would not specify the amount until two independent consultants deliver their assessment of the capital needs some time before June 21.
Spain's banks are suffering a hangover from the effects of a near-decade building boom that ended in 2008 leaving lenders saddled with around 300 billion euros ($374 billion) in loans to housebuilders, equivalent to nearly one third of the country's gross domestic product.
Two recessions in three years and the highest unemployment rate amongst developed nations has compounded the banks' problems, increasing the likelihood of defaults on mortgage payments and business loans.
Evictions, up to 200 a day, have become a painful symbol of Spain's profound five-year economic crisis after a collapsed housing market and building industry put millions out of work.
Evictions of Spaniards unable to pay their mortgage almost doubled to some 50,000 last year, from 27,000 in 2008.
The sudden escalation of the Spanish banking crisis was dramatised by last month's hasty nationalisation of troubled lender Bankia.
A week after the nationalisation, Bankia asked for a 19 billion euros (15.19 billion pounds) bailout to repair losses from a property crash.
"The situation, as you say, is very difficult, it's very complicated, the risk premium has increased a lot and that means it's very difficult to finance oneself, it's very difficult to do it at reasonable price," Spanish Prime Minister Mariano Rajoy warned at a session in parliament as Spain's risk premium reached historic levels.
The European Commission and EU paymaster Germany both agreed in principle last week that Spain should be given an extra year to bring its budget deficit down below the EU limit of three percent of gross domestic product because of a deep recession.
Spain's unemployment rate is the highest in the euro zone at 24.4 percent in the first quarter.
With its banking sector cleaned up, the challenge that remains is whether Spain can combine austerity and growth.