£80bn) from eurozone funds to help shore up itsstruggling banks has
won broad support.
The International MonetaryFund (IMF) said the bailout was big enough
to restore credibility to Spain's banks.
Washington welcomed the measure as a vital step towards the "financial
union" of the eurozone.
The move was agreed during emergency talks between eurozone finance
ministers on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should
provide "assurance that thefinancing needs of Spain's banking system
will be fully met".
"I strongly welcome the statement by the Eurogroup, which complements
the measurestaken by the Spanish authorities in recent weeksto
strengthen the banking system," she said.
"The IMF stands ready, at the invitation of the Eurogroup members, to
support the implementation and monitoring of this financialassistance
through regular reporting."
US Treasury Secretary Timothy Geithner welcomed the latest movesas
"important for the health of Spain's economy and as concrete steps on
the path to financial union, which is vital to the resilience of the
euro area".
Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
Capital
Capital
For investors, it refers to their stock of wealth, which can be put to
work in order to earn income. For companies, it typically refers to
sources of financing such as newly issued shares.
For banks, it refers to theirability to absorb losses in their
accounts. Banks normally obtain capital either by issuing new shares,
or by keeping hold of profits instead of paying them out as dividends.
If a bank writes off a loss on one of its assets - for example, if it
makes a loan that is not repaid - then the bank must also write off a
corresponding amount of its capital. If a bank runs out of capital,
then it is insolvent, meaning it doesnot have enough assets torepay
its debts.
Glossary in full
France's Finance Minister Pierre Moscovici said the deal would
"contribute to restoring confidence in the eurozone".
'Not a rescue'
Earlier, Spanish Economy Minister Luis de Guindos announced that his
countrywould shortly make a formal request for assistance.
He said the help would be for the financial system, not the economy as
a whole. "This is not a rescue," he said.
Mr De Guindos said the aid would not come with new austerity measures
attached to the economy. Spain has already imposed strict economic
reforms in a bid to tackle its debt problems.
The loan will bolster Spain's weakest banks, left with billions of
euros worth of bad loans following the collapse of a property boom and
the recession that followed.
Some banks borrowed large amounts on the international markets to lend
to developers and homebuyers, a riskier strategy than funding it with
deposits from savings.
The exact amount that Spain will receive will be decided after the
completion of two audits of its banks, due to be completed by the end
of June.
The money will come from two funds created to help eurozone members in
financial distress - the European Financial StabilityFacility (EFSF)
and the European Stability Mechanism (ESM), which enters into force
next month.
Investors have recently demanded higher and higher costs to lend to
Spain, making it too expensive for the country to borrow the money
needed for a bank rescue from the markets.