Tags: Spain | Crisis | euro | bank

Spain: Euro Partners' Pledges Sufficient to Fix Banks

Monday, 03 Sep 2012 02:30 PM

Spain's ailing banks won't likely need to tap all the €100 billion ($125.7 billion) that's been made available by the country's euro partners, Economy Minister Luis de Guindos said Monday.

In a further indication that Spain's economic problems are not as acute as some in the markets have been fearing, De Guindos also insisted that no additional austerity measures will be needed to meet the Spanish government's deficit-reduction target. Spain is battling to avoid the same bailout fate as Greece, Ireland, Portugal and Cyprus.

However, De Guindos said Spain's most troubled bank, Bankia, will get urgent aid, while two indebted Spanish regions appealed for emergency funding to deal with a crippling liquidity crunch.

Spain's banks have an estimated €184 billion in problematic real estate loans and investments following the collapse of the country's property market in 2008. The other 16 eurozone countries have set aside the rescue package to help troubled Spanish lenders.

"In principle, it looks like not all of (the €100 billion) will be used," De Guindos told Onda Cero radio.

De Guindos said austerity policies being enacted by the government will be enough for Spain to meet its target of reducing the budget deficit to 6.3 percent of national income this year from 9 percent last. The government has already unveiled a €65 billion package of tax hikes and spending cuts.

"Spain has already set out a path which is sufficient for the problems we face," De Guindos said.

He said he didn't expect other eurozone countries to demand more economic reforms in Spain. Spain is in a double-dip recession with a near 25 percent unemployment rate. Investors fearing Spain may not be able to pay off its debts have charged high prices for loans to the country. That's piled the pressure on Spain to reduce its swollen deficit, cut central and regional government spending and clean up its banking system.

German Chancellor Angela Merkel is due to visit Madrid on Thursday for talks with Prime Minister Mariano Rajoy. Her spokesman, Steffen Seibert, said Monday that Spain must push through its reform plans to improve the long-term prospects of its economy and alleviate market concerns.

"We have said many times in the Spanish case ... that the path Spain has taken recently is remarkable. And that will — as in other countries — when the homework has been done, when the structure of the economy and the labor market has been improved, lead to that being reflected in interest rates," Seibert told reporters in Berlin.

De Guindos predicted that the €100 billion in bank rescue funds would become available by early November, once the banks' restructuring plans are unveiled in the middle of this month.

However, he said an emergency advance loan of up to €5 billion for Bankia, a leading bank that was nationalized in May, could be announced later Monday. Bankia has called for a total of €24 billion in public aid.

Spain's heavily indebted regions are another concern for the government. The northeastern region of Catalonia, which announced last week it would seek €5.02 billion in aid from the central government, said Monday it urgently needs money and won't be able to wait until September, as planned, El Pais reported. Also, the regional government of Andalucia is asking for €1 billion in emergency funding, it said.

Though the Spanish government is reluctant to accept conditions that would likely be imposed as part of a wider bailout, Foreign Minister Jose Manuel Garcia Margallo signaled that his country is willing to surrender some degree of sovereignty as part of efforts to draw a line under the eurozone's financial crisis.

He said Spain hoped to make progress toward greater European banking, fiscal and political union during the meeting with Merkel.

"We need to move towards a United States of Europe," he said.

© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 
1Like our page
2Share
633
2012-30-03
Monday, 03 Sep 2012 02:30 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved