Brussels, 30/09/2013 (Agence Europe) - Representatives of lenders to Spain have welcomed the country's implementation of its financial aid programme, but point out risks to the country's economy that could jeopardise economic stabilisation.
In a press release published on Monday 30 September after their fourth monitoring mission on implementation of the Spanish aid programme in return for aid of €41 billion to bail out its banks, the European Commission and the ECB say: “The liquidity situation and the financing structure of the Spanish banking sector have further improved as bank deposits have been rising and Spanish banks are regaining access to funding markets. The solvency position of Spanish banks has remained comfortable after the recapitalisation of parts of the banking sector, the transfer of assets to SAREB (the Spanish asset management company) and overall positive earnings results of Spanish banks over 2013 so far. Consequently, all banks are reporting solvency rates above the strengthened regulatory minimum requirements as set by the Memorandum of Understanding (…)Compliance with the horizontal policy requirements in the Memorandum of Understanding is nearly complete.”
The report continues: “Nevertheless, the broader economic environment has continued to weigh on the banking sector. Lending to the economy is still contracting substantially, in particular against the backdrop of weak demand for new lending and persisting EU banking markets' fragmentation. While there are early signs of a general economic stabilisation, both the private and public sector need to reduce their debt stocks going forward, and the adjustment in the real estate market is still on-going. Both elements still impinge on the profitability prospects of banks, even if the bulk of the effect of real estate assets deterioration on banks' profitability has already been accounted for through special provisioning. Therefore, supervisors and policy makers have to continue to monitor decisively the process of stabilising the banking sector. Sustained proper diagnostics of the shock resilience and solvency of the Spanish banking sector remains vital.'
The country's lenders say: “The economy is showing signs of bottoming out, supported in particular by net exports.” On Friday, the Spanish government unveiled a draft budget for 2014, forecasting growth of 0.5% in 2014 and hoping to reduce the budget deficit to 6.5% of GDP in 2013 and 5.8% in 2014. The Spanish public debt is expected to stand at 96.8% of GDP.
The lenders welcome reforms of the country's pensions system and reforms to “unify the Spanish internal market, liberalise professional services, deliver more effective local and public administration and make product and services markets more dynamic.” The next assessment mission to Spain, the final one, will take place in December. (MB/transl.fl)