Spain made a formal request on Monday asking fellow Eurozone countries to help with its crumbling banks -- a financial aid package that could be worth up to 100 billion euros, or about $125 billion.
“Restructuring the banking sector is key to reinforce the confidence in the Spanish economy and to restore the conditions to proper access to credit by companies and households, thus for sustaining the recovery,” said European Commission Vice Preisdnet Olli Rehn in a statement.
The rescue effort, he said, could begin within a few weeks. In response, stocks across Wall Street dropped. The Dow was down more than 150 points, or 1.3%, in late-morning trading in New York; the S&P 500 dipped 1.6% and Nasdaq fell more than 1.8%.Spain’s economy minister Luis de Guindos made the appeal for funds in a letter to Eurogroup chairman Jean-Claude Junker. The aid package, he wrote, should be large enough to leave the country with a security reserve after its banks are stabilized.
“The Spanish authorities will offer all their support in evaluating the eligibility criteria, the definition of financial conditionality, the monitoring of the implementation of measures, and the definition of the contracts for financial aid,” wrote De Guindos, according to a translation from The Guardian.
The Eurozone’s fourth-largest economy has long struggled with the consequences of its real estate crash. Earlier this month, finance ministers around the continent offered Spain a 100-billion euro lifeline to steady its banking system.
An independent audit last week of Spain’s banking system -- which found that a fix could come with a price tag of 62 billion euros, or $77 billion -- will be used to help determine how much aid the country gets.
But as Spain heads toward territory already trod by the likes of Greece, Ireland and Portugal, worries are increasingly being focused on Italy. The nation, mired in its fourth recession in a decade, is likely to see its economy continue to contract this year.