World

Tuesday 22 July 2014

Spain formally applies for bank aid

Robin Emmot

Published 04/12/2012|05:00

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Spanish Prime Minister Mariano Rajoy. Photo: Reuters

SPAIN formally requested aid for its banking sector yesterday, seeking disbursement of €39.5bn of European funds, as agreed under a June rescue deal.

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The money represents €37bn for its four nationalised banks – Bankia, Catalunya Banc, NCG Banco and Banco de Valencia – and €2.5bn for a so-called "bad bank". It should be paid to the state's banking fund by mid-December, the ministry said.

Despite the bailout for its stricken banking sector, Spain faces speculation that it will require a sovereign rescue also. So far, Prime Minister Mariano Rajoy has resisted making a decision on that count, although in an interview over the weekend he did not rule out the possibility of a rescue by the ECB.

Spain is trying to reduce its deficit to 6.4pc of its gross domestic product (GDP) for this year, but could struggle to hit that target as its economic downturn shrinks tax revenues.

Jobless

One in four of the workforce is jobless in Spain, which is suffering its second recession in three years.

"It is very complicated to reduce the deficit by 2.6 percentage points in the context of a recession, with so many revenue problems and with such high financing costs," Mr Rajoy said.

"Our objective is to do things well and see what happens at the end of the year."

As well as refusing to rule out a rescue for Spain, he also said he could not rule out further austerity measures.

Mr Rajoy's government has introduced more than €60bn of spending cuts since it came to power at the end of last year.

Spain is facing growing discontent over its austerity drive, however. The weekend saw thousands of disabled people march in Madrid against benefit cuts.

A recent survey showed 85pc of Spaniards have little or no faith in Mr Rajoy, whose government on Friday broke a campaign promise when it said it would no longer raise pensions in line with inflation. (Reuters)

Irish Independent

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