Spain promises plan for a bad bank is on track

 
City A.M. Reporter
SPAIN is not negotiating further austerity measures with Brussels as part of talks over possible European Central Bank (ECB) intervention to bring down the struggling state’s borrowing costs, its economy minister said yesterday.

Luis de Guindos also insisted that Spanish and EU authorities are in agreement over plans for a bad bank to hold toxic real estate assets, as they try to prevent the country’s banking and housing crises from worsening.

“There has not been any disagreement with Brussels,” de Guindos said.

Spain must set up the new vehicle to cleanse the sector of soured loans and repossessed real estate that have built up since a decade-long property bubble burst four years ago.

The government will approve its regulatory framework on Friday, de Guindos told reporters.

Establishing the bad bank is one of the conditions attached to up to €100bn (£79bn) in European aid for the financial sector that Spain was granted in June.

A technical mission from the troika of lenders – the European Commission, ECB, and the International Monetary Fund – met officials from the Bank of Spain and the economy ministry in Madrid last Friday to discuss the bad bank’s creation.

Another Spanish region – Valencia – will need €3.5bn from the central state’s rescue fund to get through this year, reports from Bloomberg also suggested yesterday.

Catalonia recently admitted that it needed €5bn from the central fund.