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Spain Under Pressure To Finalize Bailout Deal

Jun 21, 2012
Originally published on June 21, 2012 4:30 am
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RENEE MONTAGNE, HOST:

NPR's business news starts with protests in Spain.

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MONTAGNE: Spain is under pressure to finalize details of a European bank bailout of up to $125 billion. Audits due later today will show just how indebted Spanish banks are.

But austerity and economic uncertainty have already sparked violence, as Lauren Frayer reports from Madrid.

LAUREN FRAYER, BYLINE: Spanish coal miners angry over budget cuts threatened and threw chairs at their mayor yesterday at a cafe in northern Spain. Miners have been on strike for weeks.

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FRAYER: They've barricaded highways and a rail line, and launched homemade rockets at police. Tomorrow they head to the capital. This is the kind of unrest that can explode as Spain's finances are squeezed. The interest rate Spain pays to finance its debts hit record highs this week.

But Prime Minister Mariano Rajoy says he's been assured of more European help.

PRIME MINISTER MARIANO RAJOY: (Spanish spoken)

FRAYER: It's clear, firm support for structural reforms and controls on spending, Rajoy told reporters.

On top of this bailout for Spanish banks, the government might now need a rescue too. The European Central Bank or rescue funds may have to jump in to buy Spanish bonds - to keep the country afloat.

Germany hasn't agreed to that yet. But if it doesn't? All the acronyms in Europe won't be enough to stop Spain - and Italy's - spiraling debt costs, says economist Federico Steinberg.

FREDERICO STEINBERG: A complete bailout for Spain or Italy could probably exhaust the funds of the ESM, the IMF and everything and maybe force a collapse of the eurozone.

FRAYER: Rajoy is trying to avoid that at all costs. Tomorrow, Friday, he flies to Rome to ask what Italy, France, and especially Germany, are willing to give.

For NPR News, I'm Lauren Frayer in Madrid. Transcript provided by NPR, Copyright NPR.