Spain and Cyprus request eurozone rescues

26 Jun 2012, 6:24 am   -   Source: AAP
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Spain's request came at a key moment in the eurozone crisis after debt markets sent Spanish and Italian borrowing rates spiralling and raised concerns for the future of the currency union itself. (Getty)

Spain's request came at a key moment in the eurozone crisis after debt markets sent Spanish and Italian borrowing rates spiralling and raised concerns for the future of the currency union itself. (Getty)

Spain and Cyprus have made formal bailout requests at the start of a pivotal week for the troubled eurozone.

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Spain has formally requested a banking rescue of up to 100 billion euros ($A125.6 billion) and Cyprus also asked for a bailout, as a pivotal week for the eurozone's future began.

With EU leaders under mounting pressure to take steps to deepen integration to finally get to grips with the debt crisis at a two-day summit beginning on Thursday, Cyprus becomes the fifth out of the bloc's 17 members to seek assistance.

There was increasing uncertainty about the new Greek government, with the incoming finance minister resigning over health reasons and Prime Minister Antonis Samaras recovering from surgery on a detached retina, with a review of its bailout program delayed.

Spain's request provided no exact figure for the aid to be delivered to its banks, which are hobbled by huge, reckless loans that turned sour after a property bubble imploded in 2008.

Though a formality, it came at a key moment in the eurozone crisis after debt markets sent Spanish and Italian borrowing rates spiralling and raised concerns for the future of the currency union itself.

A full-blown bailout for Spain, the fourth-largest economy in the eurozone, would dwarf the rescues of Ireland, Greece and Portugal and strain EU resources.

European Union leaders are set to consider deepening economic and monetary union when they meet on Thursday and Friday to overcome the debt crisis that has wracked the eurozone for two years.

They also face demands from Greece's three-party coalition government for new terms on its bailout, including a two-year deadline extension on reforms.

But German Chancellor Angela Merkel's spokesman, Steffen Seibert, warned that no decision would be taken until an international team of auditors had assessed Greece's economy.

Auditors from the European Union, IMF and European Central Bank postponed a visit to Greece originally set to begin on Monday due to the health problems of Greek leaders. No new date has been set.

Prime Minister Antonis Samaras was released from hospital on Monday, two days after surgery, and told to stay at home for at least a week to recover.

Meanwhile incoming finance minister Vassilis Rapanos, who had been hospitalised with stomach pain, in the end declined the post.

Cyprus also finally requested help from its eurozone partners, although it did not specify the amount. But local media speculated it would be in the region of five billion euros.

It was not clear whether the help was for its banks or a general government bailout, but the Cyprus government has previously said it was looking at European financial support to help its banking system recapitalise after the writedown of Greek government bonds.

Euro Crisis

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