By Vivienne Russell | 11 June 2012

Spain has accepted a €100bn bailout from eurozone countries to prop up its ailing banking sector.

The deal, which was agreed over the weekend, would ‘breathe life’ back into the struggling Spanish economy, according to Spain’s prime minister, Mariano Rajoy. But he stressed that the deal was not a bailout of the Spanish nation, but the opening up of a European credit line for the country’s financial institutions.

The credit line, he said, ‘doesn't imply macro-economic conditionality for our country, but for those financial entities that receive loans’. It will be the banks, rather than Spanish taxpayers, that will have to repay them.

Rajoy said the help from the eurogroup would enable ‘credit to flow once again to families, to entrepreneurs, to small- and medium-sized enterprises, to workers and to independent contractors so that they can all develop their initiatives, maintain or set up companies while, at the same, time, creating jobs’.

A statement issued by the eurogroup said member states were willing to respond ‘favourably’ to requests from Spain for assistance.

‘The eurogroup notes that Spain has already implemented significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks. The eurogroup is confident that Spain will honour its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester. Progress in these areas will be closely and regularly reviewed also, in parallel with the financial assistance,' it said.

The European Commission said it was ready to proceed swiftly with the assessment of the capital requirements needed, working closely with the European Central Bank, the European Banking Authority and the International Monetary Fund. In a statement, commission president José Manuel Barroso and vice president Oli Rehn, said: ‘With this thorough restructuring of the banking sector, together with the on-going determined implementation of structural reforms and fiscal consolidation, we are certain that Spain can gradually regain the confidence of investors and market participants and create the conditions for a return to sustainable growth and job creation.’

IMF managing director Christine Lagarde said she strongly welcomed the eurogroup’s statement, which complemented action taken by Spanish authorities to strengthen the country’s banking system.

‘The IMF stands ready, at the invitation of the eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting,’ she added.