Spain doesn’t need any more EU bailout money, says European Commission

The EU appears to be satisfied with Spain's economic progress

Although the deficit is still rising and the economy continues to stagnate, Spain is unlikely to require additional bailout money from the EU, a recent European Commission report has found.

This time last year, Madrid was forced to request financial assistance from the European Union, with the state of the country’s banks a cause for immediate concern. Following the €100bn granted to Spain (of which it has drawn only €41.3bn), the situation has stabilised, with a number of radical reforms bringing calm to the banking sector…

In its third review of Spain’s aid programme, the European Commission concluded that “there is at present no reason to foresee further programme disbursements,” adding: “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.”

Although Spain – which is still the eurozone’s fourth largest economy – is still hamstrung by its precarious economic situation, there have been some tangible signs of improvement in recent months. Net exports are growing, brain drain has slowed and the annual summer jobs boom has helped massage the unemployment figures somewhat.

“The positive trends in the stabilisation of the Spanish financial sector need to be maintained, and the close monitoring thereof should continue,” the Commission’s report said. The banking sector is now much more stable, if lacking in profitability, which has had some negative knock-on side effects for other parts of the economy, particularly real estate.

Property prices have fallen by up to 30 per cent in some places, and have been close to touching bottom for the past nine months. Mortgage lenders remain cautious, making financing a property purchase in Spain quite tricky for some.

There was good news elsewhere as American car giants General Motors (makers of Vauxhall and Opel vehicles) announced that it will shift a large proportion of production of its new Mokka SUV model from South Korea to Spain, protecting an estimated 5,800 jobs at its Zaragoza plant.

”We’ll be able to produce the Mokka in greater numbers and supply our customers more quickly, GM’s Chief Executive Karl-Thomas Neumann said.

Meanwhile, the European Commission has advised Madrid to continue its programme of gradual budget corrections and labour market reforms – a programme that hasn’t won the Prime Minister, Mariano Rajoy, many friends in either the public or private sector, but appears to be a case of harsh, but effective, medicine.