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Spain: Bailout move could come soon

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Spain may need to ask for international help for its banking sector

Spain may need to ask for international help for its banking sector

Spain may need to ask for international help for its banking sector

Spain could decide within days or weeks to ask for a bailout for its troubled banking sector, making it the fourth eurozone country to seek help since the EU debt crisis erupted.

Deputy prime minister Soraya Saenz de Santamaria said the government would not act until it received a raft of reports on how much money Spain needed to save its banks from collapsing under the weight of soured property investments.

An International Monetary Fund report was released early today and two independent auditor surveys were due by June 21.

"Once the estimates of the numbers are known with regard to what the financial sector might need, the government will state its position," Ms Saenz de Santamaria said. "But in any case, I am telling you that no decision has been made either way."

She declined to say how much the sector, hit by the collapse of the country's property bubble, might need. Estimates of the cost of bailing out Spain's banks vary greatly, from 40 billion euros (£32.3 billion) to as much as 100 billion (£80.8 billion).

The IMF said it estimates that Spanish banks need at least a 40 billion-euro capital injection following a stress test it performed on the country's financial sector.

Commenting on reports that the 17 eurozone finance ministers will hold a conference call on Spain, Ms Saenz de Santamaria said "no meeting is planned" but would not confirm or deny whether some kind of communication would take place.

The Spanish government appears to have resigned itself to the fact that it needs a bailout with money pumped in from Europe to prop up its struggling banks, and cannot handle the job on its own. Prime minister Mariano Rajoy has moved on from firmly stating that "there will be no rescue of the Spanish banking sector" 10 days ago to avoiding ruling out seeking external help for the banking sector of the eurozone's fourth largest economy.

Spain has been criticised for being too slow to set out a road map to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil sparked by the Greek elections on June 17.

Spain's economy is in a terrible condition. It is in its second recession in three years, unemployment is nearly 25% and there is little hope for improvement this year. Mr Rajoy's government has imposed a wave of austerity measures since he took office in December that have raised taxes, made it cheaper to hire and fire workers and cut government funding for education and health care.

PA