RECORD HIGH: Bad loans at Spanish banks struck a new record high in September, official data showed, despite the near completion of a 41-billion-euro eurozone-financed bailout of the battered financial sector. — Bloomberg photo
MADRID: Bad loans at Spanish banks struck a new record high in September, official data showed, despite the near completion of a 41-billion-euro eurozone-financed bailout of the battered financial sector.
Risky loans, mostly linked to the collapsed property sector, climbed by 6.9 billion euros from the previous month to an unprecedented 187.8 billion euros (US$254 billion) in September, a Bank of Spain report showed.
The bad loans rose to 12.68 per cent of all credit extended by banks in Spain in September from 12.14 per cent in August, representing a fourth consecutive record high.
Last year, the eurozone agreed to extend a rescue loan of up to 100 billion euros to shore up the balance sheets of Spain’s banks, swamped in bad loans since a property bubble imploded in 2008 plunging the country into a recession.
Spain, the eurozone’s fourth-largest economy, has drawn 41.3 billion euros from the rescue loan.
Despite the persistently high level of bad loans, Prime Minister Mariano Rajoy’s government last week said it would exit the eurozone-funded banking bailout in January.
Economy Minister Luis de Guindos said in Brussels that Spain would not request fallback assistance from the European Stability Mechanism, a rescue fund set up to provide a safety net for heavily-indebted governments.
While applauding Spain’s decision for the signal sent to markets, eurozone finance ministers called on Madrid to push forward with reforms to address the country’s economic challenges, budget shortfalls, high debt, and mass unemployment.
European Union chiefs said Spain’s draft 2014 spending plans placed it “at risk of non-compliance” with its deficit-cutting targets.
Spain has agreed to respect EU-norms by reducing the deficit to less than three per cent of total economic output by 2016.
Spain suffered a double-dip recession after the 2008 property collapse, emerging gingerly from the last downturn with 0.1-per cent economic growth in the third quarter.
Economists warn of threats to its economic recovery, however, and say that the unemployment rate – running at 26 per cent in the third quarter of 2013 – will remain painfully high for years to come. — AFP