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A man walks by a Bankia bank with its cash machine covered by a poster reading "this bank cheat and fraud".

Spain to add another €6 billion to bank bailout fund

The extra funds are being provided while ministers work on sorting out the formal bailout from European funding.

THE SPANISH GOVERNMENT will inject another €6 billion into its bank rescue fund to cope with growing problems in its financial sector as it awaits a loan from its 16 partner countries in the eurozone.

An official with the economy ministry, speaking only on condition of anonymity because of government policy, confirmed the extra cash will raise the capital base of the bank rescue fund to €15 billion.

The fund needs the new money to make an emergency cash injection of €4.5 billion into Bankia SA, the nationalised lender, by buying new shares.

Like many of Spain’s banks, Bankia is saddled with huge amounts of soured real estate investments left over from the 2008 property market crash.

Bankia has asked for a total of €19 billion in public aid. The total amount that will be injected into Bankia should be made public in coming weeks after audits of Spain banks are completed, according to the fund for the orderly restructuring of banks, or FROB, the bank rescue fund set up to help Spain’s financial sector.

Spain could finance the fresh injection of cash into the rescue fund by issuing bonds, but no decision has been made yet, the official said.

To manage the rising cost of helping its banks, Spain has formally asked for a loan from other eurozone countries of up to €100 billion. The government expects to get the loan by early November, once the banks’ restructuring plans are unveiled in the middle of this month.

German Chancellor Angela Merkel is due to visit Madrid for talks with Prime Minister Mariano Rajoy on Thursday, where Spain’s progress with austerity measures is likely to be high on the agenda.

Read: Spanish unemployment rises again to creep towards 25 per cent

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Associated Foreign Press
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