Spanish bailout request welcomed

Spain's request for a bank bailout from the eurozone received a positive reaction, becoming the fourth and largest country to seek help since the single currency bloc's debt crisis erupted.

The International Monetary Fund (IMF) said the bailout was big enough to restore credibility to Spain's banks.

Washington welcomed the measure as a vital step towards the "financial union" of the eurozone.

The move was agreed during emergency talks between eurozone finance ministers on Saturday.

IMF managing director Christine Lagarde said the plan for Spain should provide "assurance that the financing needs of Spain's banking system will be fully met".

"I strongly welcome the statement by the Eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system," she said.

"The IMF stands ready, at the invitation of the Eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting."

US Treasury Secretary Timothy Geithner welcomed the latest moves as "important for the health of Spain's economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area".

The president of the European Commission, Jose Manuel Barroso, said he was confident that through bank restructuring and other reforms, Spain could gradually regain the confidence of investors and create the conditions needed for sustainable growth and job creation.

Earlier, Luis de Guindos, Spain's economy minister, told a news conference in Madrid on Saturday that the country had "declared its intention to request European financing for the recapitalisation of those banks that need it".

De Guindos said the aid would go to the banking sector only and would not come with new austerity conditions attached for the economy in general.

"There are no conditions of any kind on economic reforms outside of the financial sector," he said.

The minister said it was not yet clear whether the bailout would come from the the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM), the two structures set up in the European Union to deal with debt crises.

The EFSF was set up by eurozone states in 2010 to provide loans to countries in financial difficulties and recapitalise financial institutions via loans to governments.

It is backed by guarantee commitments for a total €780 billion and has a lending capacity of €440 billion, and issues bonds on the capital markets.

The ESM, agreed to by eurozone finance ministers last July, is due to replace the EFSF by July 2013 and will provide a permanent rescue fund for eurozone and non-eurozone EU countries. But the treaty creating it needs to be ratified by all eurozone member states before the end of 2012.

He gave no figure as to how much Spain would request, saying that he would wait until independent audits of the country's banking sector had been carried out before asking for a specific amount.

But he said that the amount of the rescue, up to a maximum of 100 billion euros, would be more than enough and provide a margin of security that no one could question.

Finance ministers from the 17 countries that use the euro on Saturday said they were ready to give Spain up to $125bn in a bailout.

"The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request," a statement from the group said .

The statement said the money would come from Europe's bailout funds and that the loan should include current needs and also a "safety margin".

Protesters were on the streets of Madrid within hours of the announcement. Members of the Indignando movement and their supporters said suffering citizens should benefit from international aid, not financial insitutions.