By Ian Traynor and Giles Tremlett, The Guardian


The Spanish government has until the end of the month to produce a persuasive two-year blueprint of structural reforms as part of the terms of a eurozone rescue of up to €100bn (£79bn) for its distressed banking sector.

A draft memorandum of understanding, obtained by the Guardian, between Madrid and eurozone authorities, to be finalised on 20 July, stipulates that the centre-right government of Mariano Rajoy must come up with more cuts, tax rises and measures that may wipe out the savings of hundreds of thousands of ordinary Spaniards.

The memorandum places a time bomb under what the Spanish consumers' association Adicae estimates are some €30bn invested in subordinated preference shares by retail customers at local banks – many of which have since been swapped for almost worthless bank stock.

The memorandum states: "Banks and their shareholders will take losses before state aid measures are granted and ensure loss absorption of equity and hybrid capital instruments to the full extent possible."

A savers' revolt is already brewing in Spain among those who bought preference shares and junior bonds, amid claims that they were misled by local bank managers who sold them as risk-free saving products paying up to 7% interest.

There were fears that some savers would take their remaining money to other banks, inflicting further damage on savings banks already staggering under the weight of toxic real estate left over from a decade-long housing bubble.

The draft accord also gives the European commission rights of scrutiny over the Spanish banking sector, 90% of which is to be subject to the bailout terms in a programme that is to run for 18 months.

"The European commission in liaison with the European Central Bank and the [London-based] European Banking Authority will be granted the right to conduct on-site inspections in any beneficiary financial institutions in order to monitor compliance with the conditions," says the 20-page document.

Eurozone finance ministers, meeting until the early hours of Tuesday, wrestled over the detail of the Spanish bank aid package, with Rajoy keen to create the impression that the bailout applies solely to the financial sector and comes with no strings attached for government fiscal and economic policy.

Given the recession in Spain and the high cost of borrowing feeding speculation that Madrid may ultimately need a full-blown sovereign rescue, the eurozone gave Rajoy a year's leeway in meeting Brussels' budget targets, confirming that he would have until 2014 to get the deficit to the benchmark of 3% of gross domestic product. But he has to quickly come up with further policy shifts.

"Spanish authorities should present by end-July a multi-annual budgetary plan for 2013-14, which fully specifies the structural measures that are necessary to achieve the correction of the excessive deficit," the draft states.

It also insists that Spain obey recommendations from Brussels to increase VAT and scrap tax breaks on house purchases.

It fails to specify what rate will be charged for the eurozone loans and makes no mention of the key point from the Brussels meeting: who may be liable for eventual losses from the injection of bailout capital into Spanish banks.

Olli Rehn, the European commissioner for monetary affairs, reiterated on Monday that Spain would not need to supply guarantees for the bailout funds. A recent EU summit decided to try to break the link between weak governments and failing banks by allowing for the direct recapitalisation of banks, bypassing the host country. But the meeting of finance ministers delivered conflicting signals on this.

It remains unclear who will be responsible if the eurozone countries, in the form of the bailout fund, take out equity in Spanish banks and later sell off the shares at a loss.

The first tranche of €30bn is to be disbursed at the end of the month as Rajoy presents his new policies. The beneficiaries comprising 14 banking groups are split into four categories according to the need for recapitalisation, to be determined by October by stress-testing each bank.



zde: smlouva



at a loss

se ztrtou


finann pomoc

bank stock

bankovn akcie


pjemce (finann pomoci)


projekt, (detailn) pln


zde: schylovat se k nemu


vyplatit, vydat


ve finann tsni




vlastn kapitl

fail to specify

nezpecifikovat, nekonkretizovat



housing bubble

realitn bublina


zpsobit, utdit komu co

junior bond

podadn obligace


prostor, volnost





preference share

prioritn, preferenn akcie




zchrana, pomoc


zbavit se eho, zruit co


psn a peliv dohled


vrvorat, potcet se

state aid measures

opaten sttn pomoci


ztov test

subordinated preference shares

podzen prioritn akcie




balk, st

wipe out

zcela zniit

wrestle over

zde: dohadovat se o em


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