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German lawmakers back Spanish bank aid

(Xinhua)

10:11, July 20, 2012

BERLIN, July 19 (Xinhua) -- German lawmakers approved Thursday a rescue package of up to 100 billion euros (122 billion U.S. dollars) for Spanish struggling banks, hours after new alarm was ringing as Spain's 10-year bond yields once again climbed above 7.0 percent seen as unsustainable.

The vote, which was held in a special one-day session of the Bundestag, or the lower house of parliament, during its summer break, witnessed some 473 lawmakers of the 583 MPs present endorsed the lifeline for Spanish banks, while 97 MPs objected and 13 abstained.

In the parliamentary debate, Wolfgang Schaeuble, German Finance Minister, said that markets have doubted whether Spain could solve the problems of its banking sector, which could lead to "serious contagion risks in the euro area."

"We have an exceptional situation, so we help Spain and thus contribute to stability in Europe as a whole," the minister said, adding that the economic situation in Europe was still characterized by uncertainty, and regaining lost trust would take a long time.

He noted that Spain as a whole has been "on a right track", as the country took a series of measures after the debt crisis, such as raising tax, setting debt brake and activating the labor market, "but such reforms can only succeed if the Spanish banking problems are solved."

Schaeuble said the rescue package could enable Spanish government to buy more time to promote the reforms, and to calm nervous markets and investors.

Schaeuble also tried to clear all worries about the liability of the financial aid, as some lawmakers are afraid that the Spanish government would not have to be responsible for the rescue package, if the loans were transferred from the current, but temporary bailout fund European Financial Stability Facility (EFSF) to the permanent European Stability Mechanism (ESM) once it became operational.

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