Spain passes emergency financial crisis measures
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Tuesday, 21 Oct 2008
The Spanish parliament on Monday overwhelmingly approved emergency measures aimed at restoring confidence in its financial system and in line with similar packages agreed on across the European Union.
The initiatives include the creation of a fund of up to 50 billion euros ($67.23 billion) to acquire high quality bank assets.
"The fund will invest only in the highest quality assets to make sure that it will recover and maybe even profit from the investment," Spain's Prime Minister Jose Luis Rodriguez Zapatero told parliament.
Under the agreement, the government will acquire assets including mortgage backed securities and new loans on the understanding the banks may buy back the assets at a later date.
Spanish Financial Crisis
The Prime Minister said that the measures were temporary and were not an attempt to nationalize any banks.
"We do not want to create a public bank or to replace the market," Zapatero said.
The measures also raised bank deposit guarantees from 20,000 euros to 100,000 euros, though Zapatero noted that the guarantee would not be needed, and was a measure aimed at restoring confidence for depositors.
Parliament also approved 100 billion euros of state guarantees for new financing by credit entities operating in Spain to help boost liquidity and jump start lending.
The plan comes as part of the concerted action plan agreed by the 15 members of the euro zone and the UK in early October to recapitalize banks, guarantee inter-bank lending and boost liquidity in frozen money markets.
Zapatero said that, beyond the emergency measures, Europe must reform laws that govern banking supervision and regulation and introduce anti-cyclical measures to help prevent a repetition of the current financial crisis.
Source: http://www.reuters.com
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