Euro Crisis: Spain Secures Bank Cash And Let-Off

Spain has been thrown a double lifeline as the country strives to avoid becoming the fourth member of the eurozone to seek a state bailout. (£23.7bn) lifeline towards Spain's troubled banks.

Hours after eurozone finance ministers agreed to an initial 30bn euro (£23.7bn) rescue package towards Spain's troubled banks, a wider meeting of EU ministers backed cutting the country's deficit reduction target in return for more cost-saving measures.

The moves seem to have been enough to ease immediate pressure on Spain's borrowing costs.

The country's 10-year bond yield - the rate of interest it pays to borrow money - slipped back to 6.7% late on Tuesday from the 7% danger zone.

After nine hours of talks in Brussels on Monday it was confirmed 30bn euro of the 100bn already agreed in principle would be made available to Madrid to distribute to banks by the end of the month.                

The finance ministers would return to Brussels, eurogroup chief Jean-Claude Juncker said, on July 20 to finalise the agreement, having first obtained the approval of their governments or parliaments.

Finance ministers from all 27 European Union countries eased pressure on Spain further by approving the one-year extension, until 2014, of the country's deadline for achieving a budget deficit of 3%.

On the rescue deal for banks, Mr Juncker said: "There will be specific conditions for specific banks, and the supervision of the financial sector overall will be strengthened.

"We are convinced that this conditionality will succeed in addressing the remaining weakness in the Spanish banking sector," he claimed while also confirming it would include a cap on executive salaries at the banks which receive bailout funds and a ban on bonuses.

The bailout total will likely not be known until September when individual examinations of different Spanish banks have been completed but the expectation in Brussels was that Spain would need the full 100bn euros.