Spain, Ireland To Exit From Bank Bailout Programme
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The governments of Spain and Ireland on Thursday separately announced plans to exit from international banking bailout programmes, while opting too against taking up a precautionary credit line, as market conditions and banks’ stability improve.
According to Reuters, Spain had taken up 41 billion euros of aid last year to rescue a number of banks. Ireland on the other hand had sought 67.5 billion euros of rescue funds in November 2010.
The governments of Spain and Ireland on Thursday separately announced plans to exit from international banking bailout programmes, while opting too against taking up a precautionary credit line, as market conditions and banks’ stability improve.
According to Reuters, Spain had taken up 41 billion euros of aid last year to rescue a number of banks. Ireland on the other hand had sought 67.5 billion euros of rescue funds in November 2010.
Irish Prime Minister Enda Kenny on Thursday said that his country would seen make a “clean exit” for the bailout programme, as the government had now amassed a cash pile of about 20 billion euros.
“We will exit the bailout in a strong position,” Kenny told the Irish parliament, as cited by the Financial Times. “We still have a long way to travel, but clearly are now moving in the right direction.”
[quote]”This is the right decision for Ireland, and now is the right time to take this decision,” he added. “This is the latest in a series of steps to return Ireland to normal economic, budgetary and funding conditions.”[/quote]“Like most other sovereign euro-zone countries, from 2014 we will be in a position to fund ourselves normally on the markets,” he later said.
During a meeting in Brussels, Euro zone finance ministers also agreed to allow Spain to exit from its aid programme.
“The overall situation of the Spanish banking sector has significantly improved, including the access to funding markets of Spanish banks,” the Eurogroup of euro zone finance ministers said in a statement.
Spain’s government must still sell off three nationalised banks and Brussels will continue to monitor Spain’s banking system and public finances every six months, but they too are unlikely to require further financial assistance, according to the Eurogroup.
“We are fully supportive of Spain’s decision not to request any successor European Stability Mechanism (ESM) financial assistance following the programme exit in January 2014,” the Eurogroup said in a statement.
“This is based on the fact that the ESM financial assistance and reform programme has proven to be successful in addressing financial sector vulnerabilities,” said the statement.
[quote]Spain’s exit is a “living example that EU-IMF adjustment programmes are successful provided there is a strong ownership and genuine commitment to reforms,” they added.[/quote]Related: Spain Exits 2-Year Recession, But Job Creation Remains Low
Related: Spain’s Pain: Will The Spanish Banking System Collapse?
On Wednesday, Spain’s parliament created an Independent Fiscal Authority that will oversee budgets and the deficit, which was the last outstanding condition on the aid program to be met.
Analysts say that Spain’s and Ireland’s decisions will help boost confidence in the region.
[quote]“It’s good from a confidence point of view,” told Juliet Tennent, an economist at Goodbody Stockbrokers in Dublin, to Bloomberg. “Still, we would have liked to have had continued external surveillance that would have gone with a precautionary line. But it may be that the conditions being sought may have been too onerous.”[/quote]
