News Column

Spain Praised for Bailout Reform

June 3, 2013

Spain has made progress in getting its banking sector back into shape, but should be careful not to rest on its laurels, its European creditors and the International Monetary Fund (IMF) said in separate reports Monday.

Experts from the European Commission, European Central Bank (ECB) and IMF visited the country in late May. They carry out regular reviews of the reforms that Spain committed to last year, in exchange for a bank bailout of up to 100 billion euros (130 billion dollars).

Two tranches totaling 41.37 billion euros have been disbursed by the eurozone's rescue fund so far, with no more requests expected.

The experts painted an upbeat picture of the situation in Spain, noting that it has taken action on almost all of the fronts dictated by the bailout, that its banks are enjoying more solvency and liquidity, and that financial markets have shown more confidence.

"Nonetheless, risks to the economy and hence to the financial sector remain elevated as Spain continues to undergo a difficult process of correcting large pre-crisis imbalances," the IMF warned.

"Vigilance is required to help ensure that these positive trends in the stabilization of the Spanish financial sector can be maintained," the commission and ECB added in their statement.

They identified the country's "challenging" economic situation, high unemployment rate, large private and public debt, and developments in the real-estate market as risk factors.

Spain has experienced social tensions over mortgages, which many people are struggling to pay back amid the economic crisis.

The Spanish government has indicated that it is willing to adopt reforms to provide mortgage debt relief and longer maturities, but has rejected protesters' demands to allow defaulters to settle their debt by turning their home over to the bank.

The balance between "the justified concerns of mortgage debtors" and "imperative financial stability concerns" has to be monitored, the commission and ECB said.

The IMF, meanwhile, called not only for Spain to continue implementing reforms, but also for the eurozone to help by making progress on its banking union and maintaining "a sufficiently accommodative monetary stance."

"Further action at both the euro-wide and Spanish levels could help mitigate ... risks and accelerate the return of economic growth," the Washington-based institution said.

The next review of Spain's progress is scheduled for September.


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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH


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