Spain to make clean exit from bank bailout in January

(BRUSSELS) - Spain decided Thursday to follow Ireland's lead and exit its bank bailout without seeking a precautionary credit line in reserve, eurozone finance ministers said.

However, currency partners cranked up pressure on Greece to deliver its end of the bargain on by far the biggest of the eurozone bailouts, with decisions on the next phase in its EU-IMF funding subject to political pressure notably to kickstart a failed privatisation drive.

"We are fully supportive of Spain's decision not to request any successor ESM financial assistance following the programme exit in January 2014," said a statement following Brussels talks.

Spain agreed a 100-billion-euro rescue package for its banks with eurozone partners in July 2012, although it only called in about 41 billion in loans.

"Spain took the right decisions in difficult times," Spanish Finance Minister Luis De Guindos said at the Brussels talks, adding that the aid for its banks helped Madrid -- labouring under enormous unemployment and a still-high public deficit -- avoid a full sovereign bailout.

Nonetheless, Madrid faced the same difficulty as Ireland in deciding whether or not to request fallback assistance from the European Stability Mechanism, a rescue fund set up to provide a safety net for heavily-indebted governments.

A precautionary credit line from the ESM would also open up the possibility of the European Central Bank intervening in the bond markets to support a eurozone state borrowing at normal rates.

The strictly last-resort conditions under which taxpayer monies -- which lie at the root of the ESM -- can be pumped into private banks is a key issue being debated by all 28 European Union finance ministers again on Friday.

While applauding the decision for the signal, like Ireland, sent to markets and other bailed-out countries, the Eurogroup said Madrid still had work to do.

"We call on the Spanish authorities to rigorously continue the reform momentum to address any remaining challenges regarding the economic and fiscal situation, including the high unemployment rate and the vulnerabilities stemming from the still high private and external debt."

EU Economy and Euro Commissioner Olli Rehn told a press conference after the talks that the Spanish financial market had stabilised, liquidity of banks had improved and deposits were rising.

He said the key now lay in the restructuring of Spain's local savings banks.

In Dublin, the Irish government said before Finance Minister Michael Noonan joined the talks that Ireland would not need a backstop when it exits its 85-billion-euro ($114 billion) EU-IMF bailout programme on December 15.

Noonan said in Brussels that state cash reserves of 20 billion euros meant it was a "benign" time on bond markets to go it alone and anticipated re-entering money markets fully from late-January.

Noonan underlined that government economic policy going forward would remain in line with a detailed raft of reforms that saw Dublin placed under EU-IMF 'Troika' management.

The difference being that the "responsibility" for ensuring Ireland's economy was run on a sustainable basis, after a decade of boom-times that collapsed in a crippling property crash, would now lie with the Irish government alone.

On Greece, Eurogroup chairman and Dutch Finance Minister Jeroen Dijsselbloem said Troika officials were working on the "securitisation of real estate assets" primed for Greece's big sell-off, but ESM head Klaus Regling denied this would be managed by an agency outside Greece.