In an effort to suppress an all-out war between Spain's national government and its central bank about who should pay to bail out the country's financial sector and finance necessary mergers, the European Commission has offered its aid.
The EU does not think that the central bank or national government can foot the bill for cleaning up banks facing strict provisions required to cover losses incurred in the real estate sector. A high-up representative from the EU said yesterday that Spain should resort to the EU's recovery fund in order to accelerate the rebuilding of its financial sector, which will probably need more than 52 billion euros if the crisis persists.
The Ministry of the Economy sustained that this measure is not necessary at this time and is not a part of the government's official plan. Meanwhile, the commissioner of Economic Affairs also assured that this measure would not be supported and that whether or not to deploy it is not the EU's decision. "We aren't thinking that way," he said.
The EU believes that turning to the recovery fund would have a dual effect. On the one hand, it would reactivate the flow of credit as soon as possible. On the other hand, it would reduce the stigma that could haunt the banks if they were to finance their own cleanups. Some ratings agencies have already threatened to lower credit ratings of strong Spanish banks that have to take on the burden of cleaning up the country's weaker banks.
