Britain urges rapid action on Spanish lenders

LONDON - Agence France-Presse

British finance minister George Osborne called yesterday for a rapid recapitalization of Spain’s troubled banking sector using the eurozone’s rescue fund.

Osborne spoke ahead of British Prime Minister David Cameron’s trip to Berlin, where the premier will meet German Chancellor Angela Merkel for key talks on the eurozone’s sovereign debt crisis.

“I think you would need to sort out immediately the situation in the Spanish banking system and resolve the uncertainty there, basically put money into the Spanish banking system to recapitalize it without worsening the Spanish sovereign debt situation,” Osborne told BBC Radio 4.

“Spain need to restructure their banking system, they need resources to do that. How exactly that is done must be a matter for the Spanish government and the eurozone.” In reference to the eurozone bailout fund, he added: “We need to make sure the mechanisms already put in place can be activated.”

 Chancellor of the Exchequer Osborne argued that monetary union also required a banking union in the eurozone. However, he stressed this would not involve Britain, which is not a member of the 17-nation single currency area.

Weak link

“The banks have been one of the weak links in all of this. The eurozone have tolerated weak, under-capitalised banks for too long,” he said. “Part of running a single currency ... is that you have something more akin to a banking union or a financial union. “So that, for example, Spanish depositors have confidence that they can leave their money in the Spanish banks, so that, for example, there are common funds to re-capitalise banks, so ... in return for all that there is tougher pan-eurozone supervision.” The Chancellor added that Britain would need “safeguards” to protect its financial sector, in the event of a eurozone banking union. “There is no way Britain is going to be part of that banking union. “Britain will require, if there is a full blown banking union, certain safeguards.”