EU rescue for Spanish banks already in the hands of a state-run fund

The Spanish government said Wednesday that the €39.5 billion ($51.3 billion) in bailout funds approved by European authorities for the country's troubled banks has arrived.

A spokeswoman for the Economy Ministry said the money is now in the hands of a state-run fund set up to help those banks worst hit by the property market collapse in 2008. It is expected to be distributed to the banks over the coming days.

The official spoke only on condition of anonymity in keeping with ministry regulations.

The funds are part of a €100 billion credit line earmarked for Spain's banks by the other 16 European Union countries that use the euro. The package aims to keep the cost of rescuing the banks from sinking the Spanish government's finances and forcing it to demand a bailout of its own.

The €39.5 billion figure includes €37 billion in loans for four banks already nationalized by the Spanish government. Under the deal, Bankia will get €18 billion, Catalunya Caixa €9 billion, Novagalicia €5.5 billion and Valencia Bank €4.5 billion.

In return, the banks must reduce the size of their business by 60 percent, branch numbers by 50 percent, stop lending to real estate development and concentrate on retail loans and credit to small and medium-sized companies.

Bankia, which is based in Madrid and is one of the country's main lenders, plans to shed some 6,000 workers.

The remaining €2.5 billion will help Spain's recently set up bad bank, called Sareb, that is charged with buying soured investments from other lenders.

Another four banks, Mare Nostrum, Banco Caja 3, Liberbank and Ceiss, deemed not fully capable of surviving a serious economic downturn are due to present restructuring plans before Dec. 20 so they can receive€1.5 billion more from the rescue fund.

Spain is battling to emerge from its second recession in three years, with unemployment now over 25 percent.

The conservative government's policies have triggered protests by nearly every sector of society in recent months. On Wednesday, judges and other members of the legal profession staged one-hour rallies outside courts and ministerial buildings across the country to protest a Justice reform they claim increases their workload, reduces benefits and raises the cost of filing appeals.

Prime Minister Mariano Rajoy's government maintains it has no choice but to implement the measures to reduce the bloated deficit and avoid a bailout.