By DON MELVIN
and SLOBODAN LEKIC
Associated Press
BRUSSELS — The European Union worked towards stabilizing Spain’s finances Tuesday as it backed up the blueprint for the country’s 100 billion bank bailout plan with plans to grant the country an extra year to cut its budget deficit.
Finance ministers from the 27 EU countries, meeting in Brussels, approved extending Spain’s deadline for achieving a budget deficit of less than 3 percent of its annual economic output, until 2014, said Vassos Shiarly, Cyprus’ finance minister and chair of the meeting. The size of Spain’s economy in 2011 is estimated to have been $1.5 trillion.
The move comes on the heels of an overnight meeting at which the 17 euro area finance ministers agreed on the terms of a bailout for Spain’s troubled banks, saying that the first 30 billion ($36.88 billion) in aid can be ready by the end of this month.
Last month, the eurozone’s finance ministers agreed to offer Spain up to 100 billion to prop up its stricken banking sector, which has been weakened by toxic loans and assets from a collapsed property market.
The finance ministers for the 17 countries that use the euro will return to Brussels on July 20 to finalize the agreement, having first obtained the approval of their governments or parliaments, eurozone chief Jean-Claude Juncker said.
Spanish Finance Minister Luis de Guindos said the bank bailout money — however much is ultimately deemed to be necessary — would be disbursed over 18 months.
“As far as cleaning up the Spanish financial sector is concerned, this is going to create profound, important possibilities,” he said. “We have to take full advantage of this over the next 18 months.”
De Guindos said that only one country — Finland — asked for collateral. “We are working with them on this,” he said.
Spain’s new budget targets are to have a deficit of 6.3 percent this year, falling safely under the 3 per cent ceiling to 2.8 percent in 2014, said EU Economic and Monetary Affairs Commissioner Olli Rehn.
