BERLIN (MNI) – The International Monetary Fund sees a
recapitalisation need for Spanish banks of below E50 billion, German
daily Die Welt reported Friday on its website citing a yet unreleased
IMF report.

The European Union and the German government have up to now
expected a capital need for Spanish banks of between E50 to E100
billion, according to Die Welt. “The amount that the IMF has determined
is below this range,” an IMF official with knowledge of the report told
the newspaper. The IMF is to release the report next Monday.

Fitch Ratings on Wednesday downgraded the credit rating of Spain by
three notches to ‘BBB’ from ‘A’. Fitch said it estimated the likely
fiscal cost of restructuring and recapitalising the Spanish banking
sector at between E60 to E100 billion.

The German weekly Der Spiegel reported over the weekend that the
German government had urged Spain to apply for financial aid from the
European bailout fund EFSF in order to prop up its ailing banking
sector, but that the Spanish government resisted this demand.

On Wednesday, the parliamentary leader of German Chancellor Angela
Merkel’s CDU/CSU bloc, Volker Kauder, openly called on Spain to apply
for financial aid. “I do think that Spain needs to tap the rescue fund –
not because of its state [finances] but because of its banks,” he told
German ARD public television.

German government spokesman Steffen Seibert said on Wednesday that
the European bailout funds were ready to support Spain if the country
applies for aid and accepts the conditions tied to it.

However, Seibert reaffirmed the government’s stance that the
European temporary rescue fund EFSF and the planned permanent ESM can
lend only to states and not directly to banks.

“The principles are clear, the request must come from a
government,” Seibert said at a regular press conference here. “This
government will then be liable and accepts the conditions tied to
getting the aid.”

These conditions could be “specific for the concerned banks, which
get aid, or possibly for the whole financial sector of the country that
gets aid,” he explained.

Seibert added that if the Spanish government decides to request aid
“then the European instruments are ready under the described terms.”

Merkel said on Thursday, “it is important to stress that we have
created the instruments of support in the Eurozone, and Germany is ready
to work with these instruments whenever necessary.”

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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