Spain’s in trouble
Spain started facing economic troubles since 2008 global crisis. Financial crisis caused a huge crash in the property market and significant losses at its banks. These days Spain’s citizens take part in polls in Galicia and Basque regions. Galicia’s PM Mariano Rajoy lost part of national support due to his austerity measures. Basque country’s Socialist Party met opposite influence from Basque Nationalist Party. Unemployment rate in Spain grew to 25% in some regions like Galicia since the crisis began. Spain has already asked for some contribution from Swiss banks. They received 100 billion euro for covering its financial sector. (2012, SPANISH PM MARIANO RAJOY FACES KEY VOTE IN GALICIA)
Spain’s economy grew before 2008; then country faced the recession. When Spain joined euro, house prices rose 44% from 2004 to 2008. Economy grew by 3.7% each year before 2008, but then it stopped on 1% annual growth. Spain’s government faced big problems with the highest unemployment rate in Europe and with high prices on property.
Spain’s 17 regional governments collected large debts. During the boom period they spent money on new infrastructure. For example in Valencia it was built a new airport. The situation got worse when Catalonia protesters citizens went together for a protest march. Total debt for country’s regions is 36 billion euro this year. Most banks in country face difficulties because of high-living in the boom years. After the boom, borrowers struggled with making repayments to bank. Banks made situation more difficult when they borrowed money from international markets. That’s why most of the banks met huge losses.
Spain’s recession is deep and it means that the government will receive less in taxes and pay more out in benefits.
Actions taken nowadays
Many of Spain’s small banks were refused to merge or they were rescued by larger ones. So country will be able to borrow up to 100 billion euro. But unlike previous European cases like Greece and Italy; Spain will borrow money from the European Financial Stability Facility and the European Stability Mechanism. Greece and Italy were supported by International Monetary Fund. An independent audit counted that country’s banks will need 59.3 billion euro to handle the situation. (2012, EUROZONE CRISIS EXPLAINED)
On 12th of December Spain asked for eurozone’s financial help for 37 billion euro. Of this amount, 17.96 billion recieved by a group BFA-Bankia, 9,08 billion - Catalunya Banc, 5,425 billion - Novagalicia and 4.5 billion - the Bank of Valencia. On November 28th the European Commission approved the restructuring plans of the nationalized banks. The next day, November 29th, signed an agreement on financial aid, which combines all the documents that establish the specific conditions and terms of Spain's finances from the European stabilization mechanism. However, Brussels asked the Spanish government to continue the policy of spending cuts and reforms, and proposed to limit the application of the reduced rate of VAT to raise the tax on fuel and labor reform to continue with the reduction of wages. Last Wednesday, the European Commission required the four nationalized banks significantly reduce costs, close some offices and cut staff. In addition, banks have pledged to cut bonuses for their leaders. EU Commissioner for competition policy Joaquín Almunia said that on December 20 will be approved the next phase of restructuring. This time he touches the banks of Mare Nostrum, Banco Caja 3, Liberbank and Ceiss. Almunia did not specify what exactly the amount they need. (2012, SPAIN'S SHRINKING BANKS SET FOR MORE MERGERS)
The level of investor confidence in Spain rose again - 14 months after the withdrawal of funds from the country in September was recorded inflows of $ 30 billion. Corresponding data were obtained at the balance sheet, which provides the Bank of Spain. For the first time since June 2011, he tested positive in direct...
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