Brussels, 18/11/2013 (Agence Europe) - The European Commission has drawn a generally positive portrait of the economic and financial situation in Spain in its fourth monitoring report of the Spanish programme focusing on the reform of the financial sector and published on Monday 18 November.
In keeping with its own approach, which does not allow any complacency, it stressed the areas in which there is still work to be done, a few weeks before Madrid is due to leave the programme, which was applied in exchange for aid in excess of €41 billion (see EUROPE 10964).
The balance sheets of the Spanish banks remain weighted down by non-performing loans, which are constantly on the increase. The figures published on Monday by the Bank of Spain confirm this trend for September. These non-performing loans stood at 12.7% in September, following levels already on the rise at the end of August (12.1% compared to 11.5% at the end of March). The economic environment “continues to weigh on the banking sector and constitutes the main risk factor going forward”, the report states. Lending to the real economy is still contracting, SMEs and large businesses have stated that, after attracting clients, having access to funding is their greatest problem. The Commission, which reiterates that the total payments under the European Stability Mechanism (ESM) for the recapitalisation of Spanish banks stands at €41.3 billion, does not anticipate that any further payments will be needed between now and the end of the year. All Spanish credit institutions, with the exception of one which is currently being absorbed by another bank, have reported solvency rates above the minimum statutory requirements.
The Commission welcomes a return of investor confidence, supported by implementation which was generally faithful to the programme, even though a few measures are not yet complete.
Madrid has also recorded a current-account surplus of 0.7% for the second quarter of 2013. The country is expected to return to growth, at 0.5% of GDP, from next year and although still high, unemployment has started to show signs of stabilisation, around the 26.5% mark.
Public debt (and also private sector debt) remains a critical levels. It reached 93% of GDP in July and, if it continues at this rate, it will exceed the symbolic threshold of 100% in 2015. It is due, amongst other things, to a deficit which is still excessive (-6.8% in 2013 and -5.9% in 2014, according to the Commission). The budgetary situation “remains difficult”, states the report, calling on the Spanish authorities to continue efforts in the field of structural reform and compliance with budgetary commitments. Presenting its opinion on the member states' draft budgets for 2014, the Commission called for budgetary adjustments, particularly on the rationalisation of public expenditure (see EUROPE 10964).
The final monitoring mission of the Spanish programme will start in early December, the European Commission announced on Monday. Last week, Madrid announced that it wished to come out of the programme granted to its banks without calling for additional support from the Europeans, which could have taken the form of a preventative line of credit under the ESM. (EL/transl.fl)