Spain wavers on asking for bank bailout until ‘numbers are known’

Deputy Prime Minister Soraya Saenz de Santamaria said yesterday the government would not act until receiving evaluations from the IMF on Monday and two auditors Spain has hired. The Economy Ministry said the latter are expected by June 21 at the latest.

Commenting on reports that eurozone Finance Ministers will hold a conference call today on Spain, Saenz de Santamaria said “no meeting is planned” but would not deny whether some kind of contact would take place.

Requesting a bailout would make Spain the fourth country in the 17-member eurozone to seek help since the debt crisis broke.

“Once the estimates of the numbers are known with regard to what the financial sector might need, the government will state its position,” Saenz de Santamaria said. Estimates of the cost of bailing out Spain’s banks vary greatly, from e40bn (£32bn) to as much as e100bn (£80bn).

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

There are concerns that anti-bailout Left-wing party Syriza could become the largest party in the Greek parliament, putting the country’s membership of the eurozone at risk.

And adding to the uncertainty yesterday were comments from the chairman of Cyprus’s second-largest lender who warned the country will have to seek bailout funds from the European Union to recapitalise its banking sector pummelled by exposure to Greek debt and take tough steps to shore up its finances.

The comments by Cyprus Popular Bank’s Michalis Sarris further bolster a growing sense the island will be the next in line to ask for help from the European Financial Stability Facility.

Mr Sarris is a former Finance Minister who helped steer Cyprus’ adoption of the euro. The bank he now leads is the Cypriot lender most exposed to Greek debt.

Cyprus Popular Bank posted a record e2.54bn (£2.05bn) loss last year after taking a 76 per cent write-down on its Greek government bond holdings. Mr Sarris said that if Cyprus turns to the EU bailout fund, it should have a plan to cut spending so it can avoid being forced to impose much tougher austerity measures later.

The head of Germany’s banking association, Andreas Schmitz, said: “What we now crucially need is transparency and trust. Any further uncertainty, any speculation how the situation could develop is poisonous for the markets.”