The Government plans to create a 'bad bank' to clean up the bank, after months denying it

  • De Guindos: "The rescue will not be linked to more macroeconomic adjustments"
  • The FROB will act as an "intermediary" of the banking assistance.
  • The entities that request the rescue will have to segregate their toxic assets.
  • The minister will appear before the end of July to explain the details.
  • The PSOE: "Nobody understands Rajoy when he talks about crisis, the euro" …

After months of denying the possibility, the Government described Tuesday as an "interesting alternative" the creation of the so-called "bad bank" . With this option, in theory, the entities intervened or that receive assistance from the FROB – which will manage the rescue of up to 100,000 million requested to the EU on Monday – will be able to transfer their impaired assets to an external instrument, thereby reorganizing their balance sheets.

The plan is negotiated these days between Spain and the EU. The idea of ​​the Minister of Economy, Luis De Guindos would go through the use of the bailout to buy toxic assets to the banks in exchange for a credible restructuring plan. And is that the markets distrust the Spanish financial system, as demonstrated yesterday by the rating agency Moody's, which lowered its rating massively.

De Guindos plans to use the bailout to buy toxic assets from banks . What are the risks that investors see? The main ones, " a monstrous exposure to the construction sector , the loans granted to companies that in turn have a lot of land and an incipient bubble of sovereign debt," says Daniel Lacalle, fund manager in London.

In his opinion, the solution can not be done with hot packs or in the short term, and he is committed to opening the sector to both European and foreign investors . Another banking news spoke of mergers: the shareholders of Banca Cívica (Cajasol, Caja Navarra, Caja Burgos and Caja Canarias) approved yesterday in an extraordinary meeting their merger by absorption with Caixabank, whose board also gave the green light to the operation yesterday.

De Guindos, in Congress

Minister De Guindos assured that the aid to the bank "will not be linked to a program of macroeconomic adjustments , nor will new fiscal measures be imposed", although he has acknowledged that our country will continue taking measures to fulfill its commitments due to its excessive deficit.

De Guindos has appeared on the Economy Committee of the Congress at his own request, to explain the rescue of the bank, requested after the official request made by the Executive on Monday.

The funds will be from the European Rescue Fund or the permanent mechanism that is not yet in force. The minister explained that the FROB will act as an "intermediary" for this assistance to Spanish banks, and that Spain will guarantee the return of the rescue. What remains to be clarified by the Government is where the European funds will come from: "The funds will be contributed by the European Rescue Fund or by the permanent mechanism that is not yet in force." We must remember that the Spanish Executive has fought for the rescue to go directly from the European institutions to the banks, to avoid weighing on the national debt.

De Guindos also stressed that this plan has had the solid and unanimous support of the European Union and the International Monetary Fund (IMF), which although not participate in the loan, has been called to evaluate the process, "what provides security and transparency ", according to the minister.

The main voice of the Executive in economic matters has also referred to the external audits carried out on the Spanish financial sector, which were presented last Thursday. For De Guindos, these reports prove that the sector is "healthy" and that the problems are concentrated in a small group of entities, which have already been helped or intervened by the FROB.

We must remember that these reports, made by the firms Oliver Wyman and Roland Berger, established a fork of between 51,000 and 62,000 million the needs of Spanish banks. The Spanish government requested aid whose amount should be based on these reports, plus a margin in case the conditions were worse than expected.

De Guindos has promised to return to Congress before the end of July The Minister of Economy has "committed" to reappear in Congress to explain all the details of the rescue of the banking that are in the air, "before the end of July".

On the upcoming EU summit, which everyone expects will be a turning point in the management of the crisis in the euro zone, De Guindos has assured that "we are playing a very important part of the future of the euro."

The fault is Zapatero

The minister has also returned to bear the blame for the economic situation of the country and the Spanish financial sector to the performance of the former executive, chaired by José Luis Rodríguez Zapatero.

According to De Guindos, because the government came to power and found that in the past there were "very serious errors that are now being corrected so that they do not happen again."

There were very serious mistakes that are now being corrected De Guindos recalled that from 2003 to 2009, the credit in Spain went from 800,000 million to 1,85 billion, that is, it grew much faster than the economy.

But in addition, the same happened with the credits for real estate development, from 78,000 million to 325,000 million; or with dependence on external financing.

In the last eight years, Spain's external net debt has almost quintupled and there has been an accelerated growth of credit that has generated an unprecedented bubble with money from abroad, de Guindos has criticized.

For that reason, in his opinion, in the future it will be necessary to redouble attention and control the "excessive" growth of credit , the formation of bubbles or the high dependence of the entities on external financing.

"A way of the cross"

For his part, the spokesman in the commission of the PSOE, Valeriano Gómez has responded to De Guindos that this proposal "is late" and has asked, again, that President Mariano Rajoy explain these measures in Congress. "The president's playing field is the Congress", assured Gómez.

Gomez has shared the situation in Spain with a "via crucis" that is too long "to maintain the political, economic and social integrity of this country."

The socialist spokesman has criticized the erratic communication policy of the Government. " Nobody understands Mr. Rajoy when he talks about the crisis of the Euro , of Europe or of the aid to the bank, neither you, nor we, nor the Spaniards, nor our European partners", has attacked Gómez.

The former Minister of Labor blamed the government that when requesting the audits of banks from foreign companies, they had sunk the image of the Bank of Spain (BCE). De Guindos has responded that this executive and this minister "have never undermined the presidency and solvency of the ECB , we believe it is a fundamental institution".

All the political groups have regretted that the minister's appearance came two weeks after having agreed with the European partners to rescue the bank.

  • Luis De Guindos

    The Spanish Minister of Economy, Luis de Guindos, speaks to the press in Los Cabos, Mexico. (ALEJANDRO BOLÍVAR / EFE)

    "> Luis De Guindos

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  • Needs of banking

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  • Rescue of banking