Europe backs Spain banks bailout
Finance ministers from the euro countries have unanimously approved the terms for a bailout loan for Spanish banks of up to 100 billion euro (£78 billion).
The agreement came as investor concerns on the stability of Spain's economy, and that the government itself might need rescuing, sent the country's borrowing costs soaring and its stock prices plummeting.
In early afternoon trading, Spain's main IBEX index was down 3.6% while the interest rate on the country's 10-year bond - an indicator of investor confidence in a country's ability to manage its debt - was at 7.15 %.
The document, signed off by the "eurogroup" of finance ministers following a teleconference today, calls for strict monitoring of the banks that receive aid. It also requires the Spanish government to present this month plans to reduce its budget deficit to under 3% of gross domestic product by 2014.
The agreement, which will be signed in the next few days, calls for an initial disbursement of 30 billion euro (£23 billion) this month. The full amount of money needed to shore up Spain's banks will not be known until September, after individual banks have been assessed.
Spanish banks are saddled with huge losses from soured property investments. The government cannot afford to rescue them itself.
The government last week passed painful austerity measures - tax hikes and cuts to benefits, salaries and pensions - to reduce state debt and strengthen confidences in its finances.
Spaniards have been hit hard, with unemployment around 25%, and staged massive protests across the country last night.