Ministers OK Spain bailout

BRUSSELS – Euro area finance ministers agreed early today on the terms of a bailout for Spain’s troubled banks, saying that $36.88 billion can be ready by end of this month.

The finance ministers for the 17 countries that use the euro as their official currency will return to Brussels on July 20 to finalize the agreement, having first obtained the approval of their governments or parliaments, eurozone chief Jean-Claude Juncker said early this morning.

As part of the agreement with Spain, finance ministers from all 27 European Union countries are expected today to approve a one-year extension, until 2014, of Spain’s deadline for achieving a budget deficit of 3 percent.

There will be specific conditions for specific banks, and the supervision of the financial sector overall will be strengthened, Juncker said.

“We are convinced that this conditionality will succeed in addressing the remaining weakness in the Spanish banking sector,” he said.

Dutch Finance Minister Jan Kees de Jager said the agreement should be finalized soon.

The exact amount of the bailout will likely not be known until September, when individual examinations of different Spanish banks have been completed.

De Jager said Madrid’s partners agree that “financial sector reforms in Spain must be ruthlessly implemented. These reforms include notably a cap on salaries of bank executives and a ban on bonuses.”

However, he said a system of EU-wide banking supervision still needs to be worked out.

“There are still differences over this,” he said. “The details will be worked out by the end of the year.”

But on Monday, before the eurogroup meeting began, Mario Draghi, the chief of the European Central Bank, said he was confident that a banking union in the European Union would be achieved.