BRUSSELS — In an apparent bid to raise pressure on Spain to accept a European bailout for its wobbly banks, the International Monetary Fund announced the banks would need nearly $50 billion in extra capital just to guard against a deepening of the country’s economic crisis.
The release of the estimate Friday night, several days early, came hours before finance ministers from the 17 euro zone countries were holding a conference call to try to persuade the Spanish government to swallow its pride and ask for help.
Officials have said the bailout being discussed was at least $100 billion, according to a person with knowledge of the negotiations, and is meant to provide enough of a cushion to reassure jittery markets. The I.M.F. estimate did not include costs associated with the need for banks to restructure, or to book losses on loans. Those costs would drive up the needed infusion of cash to as much as 100 billion euros, or about $125 billion, according to estimates by private firms.
Spain’s euro-zone partners have been pushing the government in Madrid to bolster the country’s fragile banking system ahead of elections in Greece next week — the outcome of which could further destabilize the shared currency. European officials hope an infusion of cash for Spain will strip some uncertainty from the markets, which will be roiled enough if the Greek election ushers in a government that upends the country’s bailout agreement.
In what some have seen as a game of brinkmanship, however, Prime Minister Mariano Rajoy of Spain has delayed seeking outside help, trying to use the fear of economic contagion to get financial aid under better terms than those that Greece, Ireland and Portugal received when they were bailed out.
Spanish officials had been saying they first wanted to review audit by the I.M.F., as well as ones by two independent consulting firms, whose first results are not due until June 21. Spain wants to avoid a repeat of the miscalculation of the problems at Bankia, a giant Spanish mortgage lender that was nationalized last month because of the growing number of bad loans on its books.
The I.M.F.’s early release of its report was a sign of the urgency felt in Europe. It estimated the banks would need to raise at least 37 billion euros, or about $46 billion.
“The extent and persistence of the economic deterioration may imply further bank losses,” Ceyla Pazarbasioglu, deputy director of the fund’s monetary and capital markets department, said in a statement. “Full implementation of reforms as well as establishing a credible public backstop are critical for preserving financial stability going forward.”
Spanish banks are struggling with significant losses in their real estate loan portfolios, and they have been hurt by the country’s broader economic malaise, which has helped push Spain’s borrowing costs close to record highs.
On Friday, President Obama urged European leaders to stabilize their financial sector and end their long-simmering sovereign debt crisis.
“These decisions are fundamentally in the hands of Europe’s leaders, and fortunately they understand the seriousness of the situation and the urgent need to act,” Mr. Obama said at a news conference. “They’ve got to stabilize their financial system. And part of that is taking clear action as soon as possible to inject capital into weak banks.”
The Obama administration is concerned continued upheaval in Europe will further destabilize the world economy, hurting the United States and the administration’s chances for re-election.
In a speech in New York on Friday, Christine Lagarde, the managing director of the I.M.F., warned that global economic conditions had again deteriorated, with growth and financial stability at stake. Tensions are “now threatening the very existence of the European project,” Ms. Lagarde said.
The person close to the talks among euro zone officials said on Friday that they wanted Madrid to ask for help “pre-emptively,” allowing Europe to contain the problem now, with details of the package to be worked out later.
Since the start of the euro debt crisis more than two years ago, three governments — in Greece, Ireland and Portugal — have had to request bailouts. And those came with stringent budget and spending conditions imposed by the European Commission, the European Central Bank and the International Monetary Fund. Those conditions have caused political upheaval in Greece, where the Coalition of the Radical Left, or Syriza, the party led by Alexis Tsipras, has vowed that if it comes to power it will refuse to live up to the nation’s bailout terms.
But Spain may be able to avoid the strict fiscal oversight that Greece had to accept. The euro zone’s bailout fund was empowered last year to make loans to governments for the specific purpose of recapitalizing banks, with the conditions and payback terms focused largely on the financial sector and not the government’s fiscal autonomy.
In another concession to make the move more palatable to Madrid, the I.M.F. would not be called in to help oversee the program, according to one of the people close to the discussions. Instead, the European Banking Authority would take its place, this person said. That, too, would give a bailout more of a bank focus, rather than the sort of broader jurisdiction over government finances that the I.M.F. typically demands.
Nytimes
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