Spanish problems persist despite bailout accord
By Sarah Collins | Monday 23 July 2012
The approval of Spain’s €100 billion bank bailout has done little to calm market pressure on the country, with government borrowing costs surging to record levels, on 23 July, and new economic data showing the country is still in recession. Problems have escalated since eurozone governments signed the bailout agreement, on 20 July, with the autonomous community of Valencia asking the central government for a cash handout and new data from the Bank of Spain showing the economy contracted by 0.4% in the second quarter of the year, after shrinking 0.3% in the first.
Spain’s bailout is designed to clean up the country’s banks by removing toxic property loans from their books and shrinking, merging or breaking up institutions that require state aid. Spanish Economy Minister Luis De Guindos has denied the country will need to ask the European Financial Stability Facility (EFSF) for a full bailout to help refinance the state’s debt, which rose by 3.7 percentage points to 72.1% of GDP in the second quarter of the year, according to Eurostat.
Spain’s Foreign Minister José Manuel García Margallo - a former member of the European Parliament’s Committee on Economic Affairs (ECON) - called, on 21 July, for the European Central Bank to step in to buy up the country’s bonds as the cost of borrowing for ten years rose beyond 7% on 23 July, a level at which Greece, Ireland and Portugal were forced to seek bailouts. The bank froze its bond purchase programme earlier this year and ECB President Mario Draghi, who met European Commission President José Manuel Barroso on 23 July for a “working lunch,” told the French newspaper
Le Monde that it was not up to the bank to “solve the financial problems of states”.
4 - Spain’s ranking in the 17-member eurozone in terms of the size of its economy (behind Germany, France and Italy)
0.4% - the amount by which Spain’s GDP fell in the first quarter of 2012. The country is predicted to remain in recession until 2014
6.3% - Spain’s new 2012 deficit target, as a percentage of GDP. The deficit was 8.9% of GDP in 2011 and must fall below 3% by 2014
774.5 billion euro - Spain’s gross debt, equivalent to 72.1% of GDP. The figure is still lower than the eurozone average
65 billion euro - the volume of cuts and tax rises to be made under Spain’s new two-and-a-half year austerity plan, announced on 11 July
24.6% - Spain’s unemployment level in 2012, which is the highest in the EU
100 million euro- the amount Spain is seeking from the European Financial Stability Facility to bail out its troubled banks
155.8 billion euro - the amount of ‘doubtful loans’ in those banks as of May 2012
(Sources: Spanish Finance Ministry, Banco de Espana, Eurostat)