Having already approved, in early November, the creation of a fund for buying up financial assets in Spain (see Europolitics 3633), the European Commission gave its all clear, on 23 December 2008, to a Spanish mechanism of guarantees for financial entities fulfilling certain conditions. The Commission deems that the mechanism meets its October guidelines on state aid to the banking sector. The state guarantee, granted in exchange for remuneration, will cover the issuing of short-term notes, bonds and securities on the official Spanish secondary market. The total amount of money earmarked for this mechanism is capped at 100 billion but it can be increased to 200 billion if market conditions require it. Only solvent banks can benefit from the mechanism. The Commission's decision covers a period of six months, after which Spain will have to terminate the mechanism or renotify the Commission that it is being...

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