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June 25, 2012

Spain, Cyprus Looking for Outside Aid for Ailing Banks

by VOA News

Spain and Cyprus - one of the euro currency bloc's biggest economies and one of its smallest - both sought eurozone bailouts Monday for their financially troubled banks.

Spain asked for up to a $125 billion rescue for banks left holding bad real estate loans. Foreign Minister Jose Manuel Margallo said details of the bailout will be determined later, including whether the loans would have to be paid by the Spanish government or the banks alone.

"About the issue of finance help for bank recapitalization, today it's just a formal procedure. The important thing is the negotiation of the contract terms, the repayment period, the longer the better, and interest rates, the lower the better. The question about if help should go directly to the banks or to the state is still open," Margallo said.

Late Monday, the Moody's ratings agency downgraded the credit ratings of 28 Spanish banks between one and four notches, citing the government's ability to support the banks.

Meanwhile, the island nation of Cyprus became the fifth eurozone country looking for financial aid from others in the currency bloc, following Greece, Ireland, Portugal and Spain. The Cypriot government did not say how much it wants to borrow.

It says its banks are vulnerable because of their "large exposure" to the economy in nearby debt-ridden Greece. Cypriot-held Greek government bonds were written down in value earlier this year.  

The Fitch ratings service became the third such firm to downgrade Cyprus' credit rating to "junk" status.

In Washington, the White House says President Barack Obama spoke with the new Greek Prime Minister Antonis Samaras Monday and congratulated him on his election. Obama urged the prime minister to work closely with the European Union and International Monetary Fund in implementing Greece's economic reform programs.

Samaras has said he wants to renegotiate the terms of the 2 multi-billion-dollar EU and IMF bailouts for Greece.

Also Monday, Greece's newly designated finance minister, Vassilis Rapanos, resigned before he could be sworn into office. He was hospitalized Friday after complaining of severe abdominal pain. He wrote in his resignation letter that his health does not permit him to carry out the job.