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Sun, 10 Jun 2012 12:47 - Updated Sun, 10 Jun 2012 12:47

Spain's Rajoy hails bank rescue as 'victory for euro'

Madrid

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Madrid - Spanish Prime Minister Mariano Rajoy has hailed a decision by eurozone finance ministers to help Spain shore up its struggling banks as a victory for the European common currency.

"It was the credibility of the euro that won," he told reporters.

On Saturday, the eurozone ministers agreed to lend Madrid up to 100bn euros ($125bn; £80bn) to help banks hit by bad property loans.

The US and the International Monetary Fund (IMF) also welcomed the move.

Mr Rajoy told a news conference in Madrid that it was part of efforts by his centre-right government to restore Spain's public finances and carry out structural reforms.

The rescue, he said, would help the "process of restoring the credibility of the Spanish economy".

"The solidity of Spain's financial system won, the credibility of the euro won," he added, and vowed to press ahead with economic reforms.

The eurozone loan will bolster Spain's weakest banks, left with billions of euros worth of bad loans following the collapse of a property boom in recent years and the recession that followed.

Some banks borrowed large amounts on the international markets to lend to developers and homebuyers.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 - 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.