22 June 2012, 18:09  Spain: Eurozone is open to direct bank aid

"The option is open," Luis de Guindos said on arrival for a second day of talks among European finance ministers in Luxembourg. Luis de Guindos said a formal request will be made in coming days. This echoes a call from Christine Lagarde, head of the IMF, that the euro zone's rescue funds to be used to bailout banks directly. Finance Minister Michael Noonan, said yesterday that Europe should "separate banking debt from sovereign debt." "To recapitalise banks and transfer accounting onto the sovereign seems an additional burden," Noonan added. But Germany, Europe's top economy and paymaster, has opposed a direct recapitalisation of banks around the euro zone. Christine Lagarde said the move would bypass national governments and avoid adding more debt to their books. She said this was necessary "to break the negative feedback loop that we have between banks and sovereigns (sovereign debt)." She has also called for the introduction of eurobonds in order to prevent the debt crisis escalating. Christine Lagarde told a news conference following a meeting of euro zone finance ministers in Luxembourg that Europe needed to move towards deeper fiscal and economic union. Using Europe's bailout funds to directly recapitalise banks has become something of a mantra for some governments alarmed at the continuing pressure on Spain's borrowing costs. The idea is that the tens of billions of euro which struggling banks might need in fresh capital should not count toward a country's national debt. De Guindos, meanwhile, reiterated that Spain would officially ask for help for its stricken banks "in the coming days." The Eurogroup of finance ministers, who met yesterday before talks widened to include non-euro nations today, urged Spain to lodge its request by Monday. Spain said that its crisis-torn banks need up to €62 billion to survive a severe financial slump, far less than the maximum €100 billion that has been offered by the Eurogroup.

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