Although the Spanish government can tap into more of the money to help other troubled banks stay afloat, the government has said it will not need the fullamount in any case.
Presenting its restructuring plan on Wednesday, Bankiasaid it would lay off 6,000 employees, or 28 percent of its work force, and cut itsbranch network by 39 percent. The bank predicted it would return to profit next year and reach earnings of 1.5 billioneuros ($1.9 billion) by 2015.
Still, the Spanish government has yet to draw a line under its banking crisis. The next step is expected in December with the creationof a so-called bad bank, which the government is trying to create by teaming up with private investors as equity holders. But the valuation of the bad bank's assets has proved to be a thorny issue because of the effect such valuations couldhave on other real estate assets. The most significant cuts will be made by Bankia, thegiant lender whose collapse and request for 19billion euros, or $25 billion,in additional capital last May led the Spanish government to negotiate a banking rescue of up to 100 billion euros ($130 billion) a month later.
The money approved Wednesday is part of that negotiated amount and willcome from the European Stability Mechanism, the rescue fund for the euro zone.
Joaquín Almunia, the European Union's antitrust commissioner, said the approval of the restructuring plans of the four banks - Bankia, Novagalicia Banco, Catalunya Banc and Banco de Valencia - was "a milestone."
