10 June 2012
Last updated at 02:04 GMT
Washington welcomed the measure as a vital step towards the "financial union" of the eurozone.
The move was agreed during emergency talks between eurozone finance ministers on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should provide "assurance that the financing needs of Spain's banking system will be fully met".
"I strongly welcome the statement by the Eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system," she said.
"The IMF stands ready, at the invitation of the Eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting."
US Treasury Secretary Timothy Geithner welcomed the latest moves as "important for the health of Spain's economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area".
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He said the help would be for the financial system, not the economy as a whole. "This is not a rescue," he said.
Mr De Guindos said the aid would not come with new austerity measures attached to the economy. Spain has already imposed strict economic reforms in a bid to tackle its debt problems.
The loan will bolster Spain's weakest banks, left with billions of euros worth of bad loans following the collapse of a property boom and the recession that followed.
Some banks borrowed large amounts on the international markets to lend to developers and homebuyers, a riskier strategy than funding it with deposits from savings.
The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due to be completed by the end of June.
The money will come from two funds created to help eurozone members in financial distress - the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), which enters into force next month.
Investors have recently demanded higher and higher costs to lend to Spain, making it too expensive for the country to borrow the money needed for a bank rescue from the markets.
Spanish bank bailout request welcomed
Spain has the highest unemployment rate in the eurozone at 24.3%
Spain's
decision to request a loan of up to 100bn euros ($125bn; £80bn) from
eurozone funds to help shore up its struggling banks has won broad
support.
The International Monetary Fund (IMF) said the bailout was big enough to restore credibility to Spain's banks.Washington welcomed the measure as a vital step towards the "financial union" of the eurozone.
The move was agreed during emergency talks between eurozone finance ministers on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should provide "assurance that the financing needs of Spain's banking system will be fully met".
"I strongly welcome the statement by the Eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system," she said.
"The IMF stands ready, at the invitation of the Eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting."
US Treasury Secretary Timothy Geithner welcomed the latest moves as "important for the health of Spain's economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area".
Continue reading the main story
Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
Capital
For investors, it refers to their stock
of wealth, which can be put to work in order to earn income. For
companies, it typically refers to sources of financing such as newly
issued shares.
For banks, it refers to their ability to absorb losses in their accounts. Banks normally obtain capital either by issuing new shares, or by keeping hold of profits instead of paying them out as dividends. If a bank writes off a loss on one of its assets - for example, if it makes a loan that is not repaid - then the bank must also write off a corresponding amount of its capital. If a bank runs out of capital, then it is insolvent, meaning it does not have enough assets to repay its debts.
For banks, it refers to their ability to absorb losses in their accounts. Banks normally obtain capital either by issuing new shares, or by keeping hold of profits instead of paying them out as dividends. If a bank writes off a loss on one of its assets - for example, if it makes a loan that is not repaid - then the bank must also write off a corresponding amount of its capital. If a bank runs out of capital, then it is insolvent, meaning it does not have enough assets to repay its debts.
France's Finance Minister Pierre Moscovici said the deal would "contribute to restoring confidence in the eurozone".
'Not a rescue'
Earlier, Spanish Economy Minister Luis de Guindos announced
that his country would shortly make a formal request for assistance. He said the help would be for the financial system, not the economy as a whole. "This is not a rescue," he said.
Mr De Guindos said the aid would not come with new austerity measures attached to the economy. Spain has already imposed strict economic reforms in a bid to tackle its debt problems.
The loan will bolster Spain's weakest banks, left with billions of euros worth of bad loans following the collapse of a property boom and the recession that followed.
Some banks borrowed large amounts on the international markets to lend to developers and homebuyers, a riskier strategy than funding it with deposits from savings.
The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due to be completed by the end of June.
The money will come from two funds created to help eurozone members in financial distress - the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), which enters into force next month.
Investors have recently demanded higher and higher costs to lend to Spain, making it too expensive for the country to borrow the money needed for a bank rescue from the markets.
Eurozone debt crisis bailouts |
|||
|---|---|---|---|
| Who | When | How much | Main problem |
Spain |
June 2012 |
Up to 100bn euros |
Some banks borrowed large amounts to lend out, feeding a property boom. The credit crisis and recession meant billions of euros worth of loans could not be repaid |
Greece |
May 2010 and March 2012 |
110bn and 130bn euros. Private lenders also wrote off debt |
Greece borrowed large amounts for public spending. The financial crisis, combined with deep-seated problems such as tax evasion, left it with massive debts |
Portugal |
May 2011 |
78bn euros |
High government spending and a weak, uncompetitive, economy built up debts it could not pay back |
Republic of Ireland |
November 2010 |
85bn euros |
Like Spain, a property crash plunged the "Celtic Tiger" economy into recession, saddling its banks, which had leant big to developers and homebuyers, with huge losses copy : http://www.bbc.co.uk/news/world |
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