European Commission insists Spain does not need more aid

City A.M. Reporter
SPAIN’S rescue programme remains on track and there is currently no need to inject extra cash into the banking sector despite the country’s challenging economic and fiscal situation, the European Commission has said.

“There is at present no reason to foresee further programme disbursements,” the Commission said yesterday in its third review of the aid programme.

“The rest of the Spanish banks either were not diagnosed with a capital shortfall in the stress test or were able to cover it by private means.”

Yet the review also warned: “A prolongation of the negative trends in unemployment, real incomes and solvency of companies beyond current expectations will heighten risks, particularly for weaker banks.”

Neighbouring France is also being dragged into economic difficulties, albeit to a lesser extent. Figures out yesterday showed that industrial production in France dipped by 0.4 per cent in May – a less severe drop than had been feared by economists after it jumped 2.2 per cent in April.

Manufacturing in France was down 1.1 per cent in May, however, slightly worse than expected.

Industrial production in Italy gained 0.1 per cent in May.

Meanwhile in Germany inflation climbed for a second straight month. A European harmonised measure of consumer prices – known as HICP – showed a 1.9 per cent rise in June, compared to a year earlier – up from May’s annualised rate of 1.6 per cent.

Germany’s own measure came in at 1.8 per cent, where it has risen from 1.2 per cent in April.

“Looking ahead, we expect HICP inflation to remain broadly at same pace until year-end and should print at two per cent year on year in December 2013,” commented Societe Generale economist Herve Amourda.