Brussels, 05/01/2012 (Agence Europe) - The Spanish economy minister, Luis de Guindos, says that Spanish banks will need to set aside a further €50 billion to cover bad property assets. “We have a property problem in Spain. But it's manageable. (…) If you take international valuations, as in the case of Ireland, you are talking about the need for €50 billion in extra provisions for the banks”, he explained in an interview with the Financial Times on Thursday 5 January. “This €50bn is about 4% of Spanish GDP. This is not Ireland. It's a completely different order of magnitude”, added the minister, stressing that the Spanish property bubble was nowhere near as acute as in Ireland.
Luis de Guindos believes that extra provisions that the banks will have to set aside will have a limited impact on the country's economy at a time when the public deficit is expected to be 8.2% of GDP in 2011 (compared with the target of 6%). “In the great majority of cases, the banks can provide it themselves from their profits... and it could be done not in one year, but in several years”, he added. This might lead to smaller banks being taken over by larger rivals. Spanish bank shares opened lower on Thursday 5 January, in reaction to the minister's comments.
Regional government. The new Spanish government under Mariano Rajoy will shortly be unveiling a package of measures to encourage economic growth and bolster the economy (which is expected to stagnate this year). The European Commission forecasts growth of 0.7% of GDP in 2012 (see EUROPE 10523). De Guindos is the former head of the Spanish and Portuguese division of the defunct American bank Lehman Brothers. He explained that the Spanish government is planning to introduce strict control mechanisms for the autonomous Spanish regional governments, warning that before their budgets can be approved, regional government ministers will have to receive a go-head from the central government. (MB/transl.fl)