Rehn: Spanish deal critical for jittery markets

Euro jumps in Asian trade after Spain bank bailout

GMT 09:30 2012 Monday ,11 June

Arab Today, arab today Euro jumps in Asian trade after Spain bank bailout

EU Economic Affairs Commissioner, Olli Rehn
Madrid - Agencies

EU Economic Affairs Commissioner, Olli Rehn The Euro jumped against other major currencies in early Asian trade Monday after the 17-nation Eurozone agreed to lend Spain up to 100 billion Euros ($125 billion) to rescue its battered banking system. The single currency bought $1.2643 and 100.45 yen against $1.2514 and 99.49 yen in New York Friday.
The rise comes after a bailout package was agreed at the weekend, which Spain's Economy Minister Luis de Guindos insisted was not a rescue but a loan that imposes conditions on the banks.
However, it marked a dramatic climbdown for Madrid, which had hotly denied any need for outside aid to prop up its troubled banking system.
Investor concerns have weighed on the Euro with tensions already high over a possible Greek exit from the bloc. The unit has tumbled to multi-year lows against the dollar and yen in recent weeks.
EU Economic Affairs Commissioner Olli Rehn said the Spain deal was critical to reassure jittery markets.
"It is a very clear signal to the market, to the public, that the Euro (area) is ready to take decisive action in order to calm down market turbulence and contagion," Rehn said.
After an emergency video conference lasting more than two hours on Saturday, Eurozone finance ministers issued a statement saying they were "willing to respond favourably" to a Spanish plea for help.
The deal was hailed by Germany, France, Japan and the US as well as the International Monetary Fund.
US Treasury Secretary Timothy Geithner said it was "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."
French Finance Minister Pierre Moscovici said that by restoring confidence in Spain's banks, "this accord will help promote the return of growth in Europe".
However, analysts were cautious, with some saying the bank deal was little more than sticking plaster for a much broader problem in the Eurozone's financial system.
"(It's a) positive near-term development for Spain, and in particular for its banks. But it does not solve Spain's overall fiscal and macroeconomic challenges, which remain substantial", Goldman Sachs said in a research note.
It added that the region's crisis: "continues to be addressed on a country-by-country basis rather than at a systemic level".
Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo, said questions also remained about details of the bank deal, as uncertainty looms over Greek elections aimed at ending a political stalemate in the debt-riddled nation.
"The agreement won't solve the debt concerns completely because the question remains how and who will give money to Spain and of course the Greek election next week," Saito told Dow Jones Newswires.
Defying all efforts by policymakers, the Eurozone emergency has now spread to the region's fourth-biggest economy -- Spain's is twice the combined size of those of Greece, Ireland and Portugal, the countries bailed out so far.
Spain finally sought aid as its borrowing costs on the open markets soared and the price for fixing the banks' balance sheets, heavily exposed to a property bubble that burst in 2008, spiralled.
The dollar was trading at 79.43 yen from 79.49 yen on Friday.

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