July 10- Euro zone ministers have agreed to grant Spain an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings and set the parameters of an aid package for Madrid's ailing banks. Sonia Legg reports.
Euro zone ministers are used to late night meetings and this one was no exception. In the early hours of Tuesday, Eurogroup President Jean-Claude Juncker confirmed what had been widely expected. (SOUNDBITE) (English) JEAN-CLAUDE JUNCKER, EUROGROUP PRESIDENT, SAYING: "We endorsed the extension of the deadline for the correction of the excessive defect for Spain by one year to 2014." The decision was taken to prevent the euro zone's fourth largest economy needing a full state bailout. But it came with a warning from European Commission Vice President Olli Rehn. (SOUNDBITE) (English) EUROPEAN COMMISSION VICE PRESIDENT OLLI REHN SAYING: "It is essential that the multiple challenges Spain is facing, the repair of its banking sector, structural reforms to boost the growth and jobs and tackle imbalances and action to restore sustainability to its public finances, are addressed with equally strong determination." And few were surprised by the extended deadline -- most investors say it's an essential recognition of increasingly difficult economic times. But Ashraf Laidi from City Index warns it could set a dangerous precedent. (SOUNDBITE) (English) ASHRAF LAIDI, CITY INDEX, SAYING: "The question is what happens when the Irish and the reeks say we need more time, we need to re-negotiate the terms." The country's finance minister called it a "good agreement". The EU also agreed on a maximum of 100 billion euros for Spain's banks -- a third of which will be available at the end of month. But many fear with the country's recession deepening and debt costs soaring the delay may not be long enough. Sonia Legg, Reuters.