EU set to extend Spain’s deficit timeline

Don Melvin and Slobodan Lekic / The Associated Press /


Published Jul 11, 2012 at 05:00AM / Updated Nov 19, 2013 at 12:31AM

BRUSSELS — The European Union worked toward stabilizing Spain’s finances Tuesday as it backed up the blueprint for the country’s 100 billion euro 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 a one-year extension, until 2014, of Spain’s deadline for achieving a budget deficit of 3 percent, said Vassos Shiarly, Cyprus’ finance minister, who chaired the meeting because his country holds the EU’s rotating presidency.

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 euros ($36.88 billion) in aid can be ready by the end of this month.

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.

Last month, the eurozone’s finance ministers agreed to offer Spain up to 100 billion euros to prop up its stricken banking sector, which has been weakened by toxic loans and assets from a collapsed property market.

Meanwhile, Greece’s new finance minister, Ioannis Stournaras, said his country will work to get its budget-balancing program back on track, but Greece too will need extra time to meet its targets.

“I think the size of the recession justifies, as Spain got an extension, that we should ask for an extension,” Stournaras said. He said he recognized it was still too early to expect a formal decision on the issue.

Investors — who had been concerned about the terms of Spain’s bailout deal and the lack of fine detail in decisions made at the June 28-29 summit in Brussels — tentatively welcomed news of Monday night’s decisions.