Spain has secured a 39.5 billion loan for its struggling banks from the Eurozone.
The funds are part of a €100 billion rescue package reserved for Spain’s banks that is intended to ease the weight on the Spanish government so it can focus on managing the national finances and avoid a full-blown sovereign bailout similar to those required by Greece, Ireland, and Portugal.
Almost all of the money will go to the nationalized Bankia, Catalunya Banc, NCG Banco, and Banco de Valencia. These were the banks worse hit by the 2008 Spanish property crash.
In September official figures from the Bank of Spain showed that 10.7% of total banks’ balance sheets were made up of “doubtful debtors”, those whose loans may not be repaid. Of all the bankruptcies in from July to September, 29.7% of them came from the construction sector.
Spain’s finance minister, Luis De Guindos, welcomed the deal. “We believe these are advantageous conditions, that will help heal, restructure and overcome the problems in the Spanish banking system. It’s positive, it’s fundamental, it’s vital, and we won’t make the mistakes of the past,” he said.
However, many financial analyst believe that Spanish banks will required more help than this one loan. “One can’t help feeling that the amount being asked for could be one of many requests over the coming months,” alleged Michael Hewson, markets analyst at CMC Markets. “With the aid being conditional on sweeping job cuts in excess of 6,000, and bank branch closures across the country the effects are likely to be felt across the entire Spanish economy, which is already seeing tax revenues shrink sharply.”