The Eurogroup has given the go-ahead for aid to Spanish banks. After the distress call arrived from Madrid on June 25, the economic ministers of the eurozone - meeting today by teleconference - unanimously decided to make available up to 100 billion euros, of which 30 will be put on the plate by the end month. The funds will have to be used by the Iberian government solely to recapitalize credit institutions in crisis. The emergency is mainly linked to the excessive amount of toxic securities linked to the real estate bubble in the banks' portfolios.
The ministers, together with the European Commission, the ECB, the IMF and the EBA have decided to guarantee Spain "a loan aimed at recapitalizing the credit institutions - reads a note - and safeguard the financial stability of the entire area EUR".
The agreement envisages that the Spanish fund for bank restructuring (Frob) will act as an "agent of the Government of Madrid, receiving funds for the banks subject to concern". Financial assistance will be guaranteed by the EFSF bailout fund until the new European Stability Mechanism (ESM) is in place.
However, the market reaction was anything but positive: the Madrid spread has broken through the wall of 600 basis points for the first time, while the Italian one has returned to 500. Meanwhile, under the spectrum of contagion, Piazza Affari collapses by 4%, while the Madrid Stock Exchange sinks by 4,3%.
The new intervention of the was not enough Spanish government, which today raised its 2012 GDP estimate slightly, which went from -1,7% to -1,5%. However, the recession will affect 2013 as well, with a further -0,5%, compared to +0,2%. Madrid also expects this year's average unemployment, already at the highest level among all advanced countries, to reach 24,6%, three decimal places higher than previous estimates. On 2013 it should decrease to 24,3% and in 2014 to 23,3%.
Meanwhile, the social situation is becoming more and more incandescent. Spanish police used rubber bullets and launched charges to disperse demonstrators in central Madrid (7 arrested, 6 injured) at the end of a huge street protest against the measures taken by the government to stem the economic crisis. Among the most contested interventions are the cut of salaries paid to state employees, the increase in VAT and the reduction of unemployment benefits. Around 80 demonstrations were organized throughout the country. The slogan of the demonstrators in the capital reads as follows: "Hands up, this is a robbery".
