Rajoy released a letter Wednesday sent by him to top eurozone leaders just before Spain asked for the bailout last weekend. In it he pleads with EU leaders to push the European Central Bank to restart a program of Spanish bond purchases that helped ease the country's borrowing rate last fall.
The letter, sent June 6 to Van Rompuy and Barroso, said Spanish companies and households desperately "need access to liquidity. This is impossible if doubts persist about the sustainability of the debt of sovereign states."
It's unclear what impact if any the letter would have, because the ECB is legally independent and forbidden by treaty to take instructions from politicians. The ECB's suspended program of bond purchases was limited in size and duration and aimed at ensuring more uniform interest rates in the eurozone — not at supporting Spain's ability to borrow.
Also unclear is where the eurozone bailout loans for Spain's banks will come from. If the money comes from the existing eurozone rescue fund, the European Financial Stability Facility, its repayments will have the same priority as all the other private bond investors.
However, if the funds come from the new bailout facility, the European Stability Mechanism, its bond repayments are supposed to be given a higher priority than everyone else's — which could mean that other debt would be less likely to be paid off. That could make bondholders less willing to buy Spain's debt or demand a higher interest rate to compensate for the added risk of losses.
Spain will wait for the results of two independent audits of the country's banking industry due by June 21 before saying how much of the €100 billion it will tap. The bailout loans will be paid into the Spanish government's Fund for Orderly Bank Restructuring (FROB), which would then use the money to strengthen the country's teetering banks.
In a report released late last week, the International Monetary Fund estimated Spain needs around €40 billion to prop up banks hurting from an unprecedented real estate boom that went bust.
Credit rating agency Fitch estimated Wednesday that the banks would need between €50 billion and €60 billion. Only in a worst case scenario would Spain need to use all €100 billion, the agency said in a report.
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Sarah DiLorenzo in Brussels and David McHugh in Frankfurt contributed to this report.
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