Madrid • European Union authorities have approved the payment of $47.96 billion in bailout loans to four of Spain's struggling banks provided each of them cut their loans and investments by 60 percent.
The plan cleared Wednesday by the EU Commission in Brussels will see Bankia getting $23 billion, Catalunya Caixa $11.6 billion, Novagalicia $7 billion and Valencia Bank $5.8 billion.
The $47.96 billion is part of a $129 billion credit line approved by the other 16 EU countries that use the euro to shore up banks hit by the country's 2008 property market collapse.
Commission Vice President Joaquin Almunia said the aim was to restore the viability of the banks.
Under the plan, the four banks must exit from lending to real estate development, limit their presence in wholesale business and concentrate on retail loans and those to small and medium-sized companies in their base regions.
They will have to reduce their branch number by 50 percent. Catalunya Caixa and Novagalicia will have to be sold by 2017 or liquidated.
The banks are also expected to move $58 billion of their assets to Spain's recently set up bad bank, SAREB, a fund that aims to buy and turn around soured investments.
In a press conference in Madrid, Bankia president Jose Ignacio Goirigolzarri said the restructuring plan would involve shedding some 6,000 employees before 2015 and closing some 1,100 branches.
Bankia, once one of Spain's top banks, said it expected to end the year with losses of $24.5 billion and return to profits in 2013.
Spain, whose economy in the middle of its second recession in three years and struggling with 25 percent unemployment, has been battling to avoid seeking a bailout for its government finances. Public finances have been hurt by the costs of rescuing banks as well as the costs of the economic turmoil in the form of lower tax revenues and higher costs to support the jobless.
In September, an independent audit commissioned by Spain estimated that the country's troubled banks would need $77 billion to survive a serious economic downturn. The government said the figure would ultimately be closer to $52 billion.
Another four banks not deemed fully capable of surviving a serious economic downturn are to present restructuring plans before Dec. 20 in order to receive rescue funds. They are Mare Nostrum, Banco Caja 3, Liberbank and Ceiss.
Most of the Spanish lenders that have needed financial help are regional savings banks that overexposed themselves to unsafe real estate business.