Forex News – Spain expected to request bailout

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Spain’s banking troubles and the country’s credit rating downgrade by Fitch yesterday have raised speculations that the government will be requesting an international bailout as soon as this weekend.

If Spain makes the request, this would make it the fourth euro zone member country to require a bailout from the EU since the outbreak of the sovereign debt crisis.

There were reports by Reuters news agency that a conference call has been arranged for Saturday between 17 euro zone finance ministries. People briefed on planning for the calls, one with senior officials and a second with finance ministers themselves, said leaders want to move quickly in order to calm growing market uncertainty and to demonstrate Spain’s commitment to stabilising the country’s financial sector.

If Spain’s request is received, the bailout amount would only be focused on the recapitalisation of the banking sector fiscal and economic policies of Spain are on track. Spanish banking executives have put the figure needed to recapitalize banks at about 40 billion euros. The recent troubles of Bankia, one of the country’s largest banks, has put a strain on government finances in order to assist the bank.

If the bailout request is made this weekend, it would be a good move by Spain as it would be before the Greek elections in a week, on Sunday June 17. If the far-left party, Syriza, wins the elections, it says it will annul the existing bailout to Greece, putting at risk Greek membership in the euro zone.