Spain has agreed to commission an independent audit of its financial system, trying to dispel market concerns that a state-funded bank bailout, set to be approved by the cabinet, could strain public finances to breaking point.
With concern over Spain's banking sector running high, the country's conservative government has given the green light to further reform. It's agreed to commission an independent audit of its financial system in an attempt to dispel market concerns that a state-funded bank bailout could strain public finances to breaking point. Deputy Prime Minister Soraya Saenz de Santamaria says the plan will force banks to raise their own capital without the aid of state funds, though aid may be sought through a convertible share mechanism. (SOUNDBITE) SORAYA SAENZ DE SANTAMARIA, SPAIN'S DEPUTY PRIME MINISTER SAYING (ENGLISH): "This will be through a system in which there will be no public help and only the banks themselves will make the corresponding provisions." The European Commission published new forecasts on Friday showing Madrid will have to make big additional savings this year and next to meet its promise to cut the public deficit to 3 percent of national output in 2013. Despite the economic woes of Spain, EU Commissioner for Economic and Monetary affairs Olli Rehn says he remains hopeful the situation will improve. (SOUNDBITE) (English) EU COMMISSIONER FOR ECONOMIC AND MONETARY AFFAIRS, OLLI REHN, SAYING : (English): "The Commission has full confidence in the determination of the Spanish government to meet the fiscal targets in line with the pact. For Spain, the key to reinforcing confidence and restoring growth is to tackle the immediate fiscal and financial challenges with full determination." However, not all officials are quite so optimistic. One senior EU source was quoted as saying that Spain is walking on the edge of a cliff...and that if it fails to deliver the country's national crisis will degenerate into a systemic crisis for the entire bloc. Ciara Sutton, Reuters