Eurozone OKs terms of bailout for Spanish banks

BRUSSELS (AP) - Finance ministers from the 17 countries that use the euro unanimously approved Friday the terms for a bailout loan for Spanish banks of up to euro100 billion ($122.9 billion).

The document, signed off by the "eurogroup" of finance ministers following a teleconference Friday, calls for strict monitoring of the banks that receive aid. It also requires the Spanish government to present this month plans to reduce its budget deficit to under 3 percent of gross domestic product by 2014.

"The eurogroup is convinced that the reforms attached to this financial agreement will contribute to ensuring a return of all parts of the Spanish banking sector to soundness and stability," the finance ministers said in a statement.

The agreement calls for an initial disbursement of euro30 billion ($36.9 billion) this month.

"The aim of this program is very clear: to provide Spain with healthy, effectively regulated and rigorously supervised banks, capable of nurturing sustainable economic growth," Olli Rehn, the European monetary affairs commissioner said in a statement.

The full amount of money needed to shore up Spain's banks is unlikely to be known until September, after individual banks have been examined. The finance ministers have agreed to lend up to euro100 billion ($122.9 billion), and the agreement to be considered Friday calls for an initial disbursement of euro30 billion ($36.9 billion) this month.

Spanish banks are saddled with huge losses from soured real estate investments. Because the government cannot afford to rescue them itself, it asked eurozone countries for the loans. It will be liable for repaying the loans until a European banking union is created, though that will likely take months.

Investors fear that the Spanish government could in the meantime face new costs helping its banks and could eventually need rescue loans itself.

Those concerns pushed the yield on Spain's benchmark 10-year bond to 7.05 percent on Friday, from 6.98 percent the previous day. The yield is indicative of the rate the government would pay if it were to raise such money from investors. A rate of 7 percent and above is widely considered too expensive for the Spanish government to pay for more than a few months.

The government has passed painful austerity measures tax hikes and cuts to benefits, salaries and pensions to reduce state debt and strengthen confidences in its finances.

Spaniards have been hit hard, with unemployment around 25 percent, and staged massive protests across the country on Thursday night.

Police say 15 people were arrested and 39 people injured overnight in central Madrid after tens of thousands of people took part in a demonstration to protest the conservative government's latest austerity package.

Police fired rubber bullets to disperse groups of protesters in streets in and around the Spanish Parliament building. The protesters set fire to garbage containers and threw cans and other objects at the police

A spokeswoman said Friday 10 police were among the injured. She spoke on condition of anonymity in keeping with police regulations.

The demonstration Thursday evening in Madrid was one of 80 held in cities across Spain to protest the austerity measures the government says are necessary if Spain wants to avoid a bailout like Greece, Ireland and Portugal.