Spanish PM: bailout averted

Spain's Prime Minister Mariano Rajoy said Sunday his government's reforms averted the need for a state bailout.

"If we had not done what we have done in the past five months, the proposal yesterday would have been a bailout of the kingdom of Spain," Rajoy said at a news conference.

His statement comes a day after Spain agreed to receive up to 100 billion euros($125 billion) in "financial help" from the eurozone to recapitalize its stricken banking sector.

The prime minister also forecasted that there would be no immediate improvement, with unemployment rates expected to rise and the recession expected to last for another three years. The country's current unemployment rate is nearly 25 percent - the highest of the 17 eurozone nations.

Rajoy on Saturday told reporters the decision to accept help had been difficult, but he refused to refer to it as a "bailout," as it was different from those received by Greece, Italy and Portugal.

"As this is a request for financial support, it has nothing to do with a bailout, nothing at all," said Spanish Economy Minister Luis de Guindos at a press conference in Madrid on Saturday.

The money could be funnelled to Spain's FROB bank fund which would in turn "inject the money into those financial institutions that need it," according to the finance minister.

De Guindos said that Madrid wished to help restore confidence in the eurozone and its reforms had been greeted with support from other European member states.

Worth "up to 100 billion euros"

The rescue package could be worth up to 100 billion euros but the International Monetary Fund (IMF) will not make a contribution, eurozone finance ministers confirmed on Saturday.

The European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) will provide the capital, a statement by the finance ministers read.

The breakthrough was welcomed by German Finance Minister Wolfgang Schäuble.

"I welcome, like other Eurogroup colleagues, the Spanish government's determination to recapitalize (the banks) via the European rescue funds, the EFSF and ESM, with corresponding conditions," he said in a statement.

IMF chief Christine Lagarde also welcomed the package, saying that her organization "stands ready at the invitation of the Eurogroup members to support the implementation and monitoring of this financial assistance through regular reporting."

A statement from the Group of Seven (G7) developed nations, released by the US Treasury Department, called the financial assistance "important progress as the euro area moves forward on greater financial and fiscal union." US Treasury Secretary Timothy Geithner also expressed support for the eurozone's "concrete steps on the path to financial union."

The bailout makes Spain, whose banking sector was hit by a boom-and-bust real estate debacle, the fourth country in the 17-member eurozone to be propped up with financial help.

sb/jlw (AP, AFP)