AP

BRUSSELS

THE European Union worked towards stabilising Spain’s finances on Tuesday as it backed up the blueprint for the country’s €100 billion bank bailout plan with plans to grant the country an extra year to cut its budget deficit.

Finance ministers from the 27 EU countries, meeting in Brussels, approved a oneyear extension, until 2014, of Spain’s deadline for achieving a budget deficit of 3 percent, said Vassos Shiarly, Cyprus’ finance minister, who chaired the meeting because his country holds the EU’s rotating presidency.

The move comes on the heels of an overnight meeting at which the 17 euro area finance ministers agreed on the terms of a bailout for Spain’s troubled banks, saying that the first €30 billion ($36.88 billion) in aid can be ready by the end of this month.

The finance ministers for the 17 countries that use the euro will return to Brussels on July 20 to finalise the agreement, having first obtained the approval of their governments or parliaments, eurozone chief Jean- Claude Juncker said.

Last month, the eurozone’s finance ministers agreed to offer Spain up to €100 billion to prop up its stricken banking sector, which has been weakened by toxic loans and assets from a collapsed property market.

Meanwhile, Greece’s new finance minister, Ioannis Stournaras, said his country will work to get its budgetbalancing program back on track, but Greece too will need extra time to meet its targets.

“I think the size of the recession justifies, as Spain got an extension, that we should ask for an extension,” Stournaras said. He said he recognized it was still too early to expect a formal decision on the issue.

Investors who had been concerned about the terms of Spain’s bailout deal and the lack of fine detail in decisions made at the June 28- 29 summit in Brussels tentatively welcomed news of Monday night’s decisions.

Markets across Europe showed slight gains early Tuesday afternoon.

In Madrid, the country’s main IBEX index rose 1 per cent to 6,756.10 while the borrowing cost of its 10-year bond dropped from 7.03 per cent Monday to 6.78 percent.

France’s CAC 40 was up 0.73 percent at 3,180.06 and Germany’s DAX had risen 0.88 percent to 6,443.33.

Juncker added that the Spanish deal will mean each bank that receives a bailout will be forced to adopt specific conditions, and the supervision of the financial sector overall will be strengthened.

“We are convinced that this conditionality will succeed in addressing the remaining weakness in the Spanish banking sector,” he said.

Dutch Finance Minister Jan Kees de Jager said the agreement should be finalized soon.

“The total will likely be €100 billion. Some countries like the Netherlands, Germany and Finland need to get parliamentary approval,” De Jager said.

“We hope this can be wrapped up within a week.” The exact amount of the bailout will likely not be known until September, when individual examinations of different Spanish banks have been completed.

Spain the fourth-largest economy in the eurozone has been struggling to keep a lid on its government deficit in the midst of a recession while trying to support its troubled banking industry. There are fears that should Spain need a bailout of its own, the eurozone would struggle to finance it, pushing the region further into recession.