IMF warns on Spain’s banks

THE INTERNATIONAL Monetary Fund (IMF) reiterated yesterday that risks to the Spanish banking system are still relatively high.

The group’s third progress report said that improvements were being made, despite strong pressures on the economy, partly through the reluctance of the financial sector to extend credit.

On the state of Spain’s troubled banks, the report stated: “Risks to the financial sector arising from the difficult economic environment still loom large, requiring continued action to safeguard the programme’s gains and better support economic recovery”.

The IMF lauded the advances made in the Spanish programme of deficit reduction. In 2012, the government managed fiscal consolidation equivalent to three per cent of GDP, the second largest among advanced economies.

The report suggested that growth would be continually weak for Spain unless the government continued reforms, particularly to the banking and financial sector.