RACHEL MARTIN, HOST:
This is WEEKEND EDITION from NPR News. I'm Rachel Martin.
Europeans woke up this morning with a couple of big fundamental questions looming over them. Have they saved Spain? And if not, is the eurozone heading for collapse? After weeks of denial, the Spanish government finally admitted what pretty much everyone else already knew: The country's banks need a bailout. The Spanish haven't said how much they need. But eurozone finance ministers had a long conference call yesterday and agreed they'd lend Spain up to $125 billion.
We're joined by NPR's Philip Reeves who's covering the eurozone crisis. Phil, Spain is the fourth Eurozone country to seek a bailout after Greece, Ireland and Portugal. It's also by far the largest country. What is the reaction to this in Europe?
PHILIP REEVES, BYLINE: Well, this is a critical new phase in a crisis that's bedeviled Europe for four years or so. Everyone has always been worried about contagion. Everyone has always said Spain, the 13th largest economy in the world, is too big to fail. And if it does fail, the eurozone will likely fall apart. So, you know, you'd expect international reaction to be positive about this bailout and it has been.
What happens in Europe and affects the United States - it sells a fifth of its exports in Europe. And U.S. Treasury Secretary Timothy Geithner has welcomed the news, so has Germany. It is, of course, by far the most important player on the European map, and so have others. But no one is under any illusions here. The problem is far from over.
In fact, with Greek elections just a week away, more rough water likely lies ahead as the Greeks might end up leaving the euro.
MARTIN: We mentioned the three other big bailouts given to European countries. How is this one different?
REEVES: Well, the amount of money is potentially bigger than that given to Ireland and Portugal. And the deal is different because when the others got their money from the EU and the IMF, it came with strict conditions. Very unpopular austerity measures in the form of hefty public spending cuts, you know, tax hikes, labor law reforms and so on.
Spain doesn't have to go on a program. It's already introduced a big tranche of austerity measures, but there are conditions with this bailout. They're going to have to reform their banking sector, which is overloaded with toxic loans, thanks to the collapse of their property bubble. And that's going to have to be done under international supervision.
It's worth noting that Germany is also making it clear that this bailout loan to Spain has been chalked up to the Spanish government, which ultimately means the taxpayer. It's not going directly to the banks.
MARTIN: So, do people think this move will actually solve the crisis itself?
REEVES: No, this is a fix. It doesn't address the root cause of a problem that's thrown the landscape of Europe out of whack, you know, with half the eurozone countries in recession, pumped to the landscape where half the young people - half - are unemployed. International pressure for Europe to get to grips with the core problem is growing. People have been saying for years that that problem is that the currency was launched with a great big hole in the boat, in the form of a lack of a fiscal union.
To solve that, the eurozone needs to pull together politically and economically. That means nations giving up sovereignty and that's a highly sensitive, difficult issue at any time, especially on the landscape where popularist nationalism has been on the rise, and where distrust is growing, and some deep historical themes are in play.
MARTIN: And, Phil, the Europeans though are being criticized for really dragging their feet over this and endangering the whole global economy, as a result. What progress are they making towards curing the actual cause of this crisis, and not just the symptoms?
REEVES: Well, specifically the focus is on creating a banking union. That would be a system where the eurozone-wide regulator, the ability to recapitalize failing banks anywhere in the zone, and to guarantee deposits across the zone.
Bottom-line though is will hardworking Germans be happy with a formal system under which their money could be used to rescue a distant, reckless, badly run bank in Southern Europe. That's obviously already happening with these one-off bailouts, but a banking union sets that in concrete.
MARTIN: NPR's Philip Reeves talking to us from London. Thanks so much, Phil.
REEVES: You're welcome. Transcript provided by NPR, Copyright National Public Radio.