On Friday 20^th July, finance ministers of the euro zone countries agreed on granting financial assistance to Spanish banking system. Purpose of the loan is similar to the Irish one – recapitalization of its financial institutions that were severely hit by the financial crisis. In their statement, ministers expressed hope that the loan “is warranted to safeguard financial stability in the euro area as a whole”. Total amount of €100 billion provided in loans by EFSF and its permanent replacement ESM will have an average maturity of 12.5 years.

Even though the loan will only provide additional capital to Spain’s wounded financial institutions, it will be fully backed by Spanish government. The difference between previous loans provided by the European rescue funds and a recent Spanish one is in conditions accompanying the loan. Spanish government, unlike Greek or Irish one, does not have to apply any budgetary measures to receive the loan, as structural reforms have already been approved by the government of Mr Rajoy. The country only must introduce bank-specific measures in the field of bank governance, regulation and supervision of financial sector.

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