A final report on the Spanish financial sector created by the EU, ECB and IMF concludes that the country will not need any more capital beyond the 43 billion euros that it already received. This is good news, but there are some privisos, becuase the economic landscape is still uncertain. On Monday the IMF lowered its global growth forecast and predicted that Spain's economy would flounder in 2014, delaying possibilities for growth until early 2015.
The troika's report supports the view that credit markets will not recover until next year. Small- and medium-sized businesses and self-employed workers in Spain are going to keep struggling to get credit for another year. Meanwhile, interest rates will remain higher than in countries in North and Central Europe. The report says that the financial sector reform will progress as expected with less exposure to the real estate market.
Still, banks will still be vulnerable because unemployment and mortgage and loan defaults are at high levels. And doubts have been sowed by anti-eviction laws in Andalusia and new refinancing regulations.
Under current circumstances, banks will only loan money to clients that have significant cash reserves. For this reason, the government is being asked to provide loans to small- and medium-sized businesses. The Ministry of the Economy should speed along healthcare reforms in order to clear up doubts about this work and help broader economic recovery, which is the only way that credit will bounce back in Spain.
