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  HOME | World (Click here for more)

Economy Minister Says Spain Won’t Need Bailout

NEW YORK – Spain’s minister of economy and finance said Thursday that Madrid will not need a financial rescue package, although she acknowledged that some of her country’s savings banks should increase their capital reserves.

“Definitely not,” Elena Salgado said in an interview aired by U.S. cable network CNBC when asked if Spain will require a Greece- or Ireland-type bailout by the European Union and the International Monetary Fund.

“But of course, any of the countries of the euro area, we need all the others because we have to improve our economic governance so we have to work together, but if you are talking about a bailout, definitely not,” she told the financial news channel.

The minister also said her country is not dependent on the European Central Bank for financing, even though some Spanish savings banks may need to turn to the ECB.

“We are confident on them because as you know we have gone through a big strong restructuring process, we have gone from 45 savings banks to 17, and of course we have gone through a stress test, very tough stress tests I have to say,” Salgado said.

The Spanish savings banks that need additional capital will likely be able to obtain those funds during the course of this year, she said.

“Our financial institutions are the same as many others in the euro area. They have gone to the ECB because the ECB facility is there so for them, it’s nonsense not to use it,” the minister said.

She also argued that the Spanish mortgage market is healthier than that of other countries.

“I think you have always to consider the level of our non-performing loans in Spain is very low,” Salgado said. “The mortgages are paid differently than in other countries, you respond not only with the house but with all the properties you have.”

“So these are robust assets, the mortgages that the banks have in their balance sheets,” she said.

The minister acknowledged, however, that Spain has three significant imbalances: the weight of the real-estate sector in the economy, the rapid expansion of credit in the private sector and the current account deficit.

“These three major imbalances are being reduced very rapidly so we think that we are in much better position now,” Salgado told CNBC.

Noting that 60 percent of the job losses in Spain in recent years have occurred in the real-estate sector, she said the government intends to “change our economic model to give more importance to other activities with more to technology and exports, this is something that we are doing.”

“Secondly, we have to continue with our structural reforms, one of the most important is the labor market reform,” she said. “We think this is the way in which we can increase our jobs in the future.”

The broadcast of Salgado’s interview with CNBC coincided with the Spanish Treasury’s successful placement Thursday of 3 billion euros ($4 billion) of five-year bonds at a 4.59 percent yield, the highest since July 2008 and up 27.5 percent from the last sale of five-year notes.

Demand was strong, with the auction more than three times oversubscribed.

The effects of the global recession were aggravated in Spain by the collapse of a long construction and property boom that made the country’s economy the envy of most of Madrid’s partners in the European Union.

Responding to the crisis, Prime Minister Jose Luis Rodriguez Zapatero’s government took steps last year aimed at boosting investment and job creation and calming fears that Spain may require a bailout.

In May, the government pushed an austerity plan through Parliament that included a pay cut for public employees and a suspension of cost-of-living adjustments for most pensioners.

A bill to overhaul Spain’s pension system is due to be sent to Parliament early this year, while other moves aimed at reducing the budget deficit to 3 percent of GDP by 2013 from the late 2009 level of more than 11 percent have included a hike in the tobacco tax and a plan to partially privatize the company that manages Spain’s airports. EFE
 

 

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