EU tells Spain to privatise two banks, praises financial sector progress

Spanish Finance Minister Luis de Guindos said that the deadlines for privatisation had been extended in order to get the public the best possible return on the money that had been used to prop up the banks. [YiAN Kourt/ Shutterstock]

The European Commission and European Central Bank have told Spain that it must complete the privatisation of the Bankia and BMN banking institutions, in order to shore up its financial sector. EURACTIV Spain reports.

The Commission Friday (9 December) published the results of its supervision of Spain’s bailout, which the executive and ECB carried out together with the European Stability Mechanism (ESM) in mid October.

“There has not been progress in privatising the two banks, which have been in state hands since 2014. Completing the restructuring and privatisation of these state banks is important in order to make the sector more stable,” said the institutions in their report.

The Commission and ECB did admit that “the restructuring of the Spanish banking sector has progressed well”, since €41 billion in financial assistance was made available by the programme, which was launched in 2012.

European Fiscal Board chief: Commission's analysis 'made a bit too quickly'

The new European Fiscal Board began working just as the European Commission took the unprecedented step of proposing a fiscal target for the eurozone. The Board’s chief, Niels Thygesen told EURACTIV.com that the Commission should have done “more analysis” before proposing an expansionist stance.

“The implementation of the restructuring plan for the Spanish banks that receive state aid has almost been completed,” said the report, which also praised the sector for cutting its cost base and adjusting its business plans. It also concluded that the Spanish financial sector is “still showing a high level of stability”.

Madrid decided on 2 December to extend its deadline for privatising the nationalised Bankia institute to 2019, a measure that Finance Minister Luis de Guindos said was intended to get a maximum return on the public money that was used to shore up the bank.

A similar two-year extension will be applied to privatising BMN, a group made up of Caja Murcia, Caja Granada and Sa Nostra.

Eurogroup ignores Commission’s expansionary fiscal target

Some eurozone members have expressed their willingness to invest more but did not take on board the executive’s proposal for a common positive fiscal stance to boost the bloc’s recovery, at a Eurogroup meeting held today (5 December).

Brussels and the ECB also noted that the process of divesting from the Spanish government’s bad bank, SAREB, “has been progressing”, but warned that there had been negative results in the first half of 2016 and that asset valuation under new accounting rules was still to be completed.

The executive also insisted that Spain would have to “redouble” its efforts in fiscal consolidation, in order to continue reducing the deficit and debt in line with its European partners; balanced, sustainable, long-term growth remains “a challenge”.