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Spain Will Remain Liable for Bank Aid: Germany

Writing by Antonia van de Velde. Reporting by Silvia Wadhwa
Thursday, 19 Jul 2012 | 5:52 AM ET

German deputy finance minister Steffen Kampeter on Thursday reiterated that the Spanish state is liable for the 100 billion euros ($123 billion) in aid that other euro zone countries are injecting into the country’s ailing banking sector and that the aid does not amount to a blank check.

Peter Weber | Stone | Getty Images

Last month, Spain formally requested the banking rescue last month to recapitalize its banks.

It had hoped the bailout would calm investors’ nerves after Spain’s borrowing costs were pushed above 7 percent, a level considered impossible to sustain.

Germany’s lower house votes on Berlin’s contribution to the 100 billion euro bailout on Thursday, and Chancellor Angela Merkel looks set to secure a majority vote in favor of the bailout despite opposition from some member of her own party.

“There is no direct infusion into the Spanish banking system. The European partners have a memorandum of understanding with the state of Spain and money is delivered to the state of Spain and guaranteed by the state,” Kampeter told CNBC.

German Deputy Fin Min: Europe Will Give Money to Spanish State
"The decision of today is quite clear; there is no direct infusion into the Spanish banking system, the European partners will deliver the money to the State of Spain and they will inject the money into the banking system," Steffen Kampeter, Parliamentary Undersecretary of State at the German Ministry for Finance, told CNBC.

“They are injecting via the FROB (Fund for Orderly Bank Restructuring), recapitalizing or reorganizing the Spanish banking system,” he said.

“The message is quite clear. Europe has a partner. It’s the Spanish state,” Kampeter said.

The European Financial Stability Facility (EFSF), Europe’s temporary financial rescue fund, will inject the money. That will eventually be replaced by the European Stability Mechanism (ESM), a permanent rescue fund.

“Our clear communication to the markets is: what today is fixed by the German parliament and will be fixed by the European finance ministers on July 20 is fixed, and we are not going on to discuss it,” Kampeter said. “A deal is a deal.”

He said it was important to stabilize the banking system immediately, and, in the medium term, the supervision of international banks in Europe needed to be reviewed.

Contact Europe: Economy

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