THE EUROPEAN Commission has asked Spain to delay unveiling a banking reform by a week to allow it study the measures in more detail, the government said yesterday.
The conservative administration of Mariano Rajoy had been expected to announce the approval of several changes to the country’s struggling financial system after yesterday’s cabinet meeting. However, deputy prime minister Soraya Sáenz de Santamaría said the commission wanted to analyse the reform further before its presentation on August 31st. “There aren’t any sticking points; we’re simply working on it together,” she said.
The Bill is expected to give the Fund for Orderly Bank Restructuring and the Bank of Spain more powers to intervene in and restructure underperforming lenders to prevent further collapses in the sector.
In May, Spain’s fourth-largest lender, Bankia, was part-nationalised after the authorities announced it would require €24 billion in state funds to keep it afloat.
The woes of Bankia and other banks saddled with toxic assets by the slump in the property sector led the government to request an EU bailout for the financial system worth up to €100 billion in June.
The banking reform is part of the memorandum of understanding Madrid signed after making the bailout request.
The government is also expected to create a “bad bank” in which to house the bad assets that have helped keep Spain at the heart of the European debt crisis in recent months.
In addition, the anticipated reform would reduce a cap on the salaries of executives of banks under state control from €600,000 per annum to €500,000, in line with the post-bailout ceiling in Ireland.
Revelations about bankers’ salaries and pensions have fuelled public anger as the country’s financial crisis has unravelled.
Spain’s borrowing costs have soared to unsustainable levels in recent weeks. Earlier this month, Mr Rajoy said he was considering accepting the European Central Bank’s offer to buy sovereign debt of struggling nations on the secondary market if formal assistance was requested.
However, Ms Santamaría said Spain was not in negotiations over such assistance. She added that Mr Rajoy would meet next week with European Council president Herman van Rompuy followed by French president François Hollande. On September 6th, he will meet German chancellor Angela Merkel.
“The activities of the prime minister seek to ensure that fiscal and banking union become a reality in Europe as soon as possible and that there are definitive solutions – not just temporary ones – to the financing problems that some states might be having,” Ms Santamaría said.
With its financial reform delayed, the government unveiled several other measures yesterday. These included the continuation, with some changes, of a €400 monthly handout for jobless workers whose dole payments expire, a scheme that was started under the previous administration. Spain has the highest unemployment rate in Europe, at nearly 25 per cent.
The government also announced measures to make the rental market more dynamic, in a bid to encourage Spaniards to rent property.
