Spain says banks must pay for future capitalisation costs

6th October 2011, Comments 0 comments

Spanish banks, and not taxpayers, must pay for any future costs of recapitalising the financial sector, Finance Minister Elena Salgado said Thursday.

The minister delivered a clear messsage that banks must now stand on their own feet, six days after the state sealed a 7.55-billion-euro ($10.2 billion) overhaul of the financial sector.

"The government's intention is that future losses that may occur in the recapitalisation of the financial sector should not be transferred to the taxpayer nor increase the public deficit," she told a news conference.

On September 30, the Spanish government completed a financial sector overhaul, securing savings banks that nearly bankrupted the country in the wake of the 2008 global financial crisis.

A state restructuring fund injected 568 million euros into Unnim, 2.47 billion euros into NovaCaixaGalicia and 1.72 billion euros to CatalunyaCaixa. Spain bought out a fourth bank, Caja Mediterraneo, for 2.8 billion euros in June.

Added to the 7.55-billion-euro in financing from the state fund were a further 5.83 billion euros in private funding.

This brought the total cost of the recapitalisation to 13.39 billion euros, less than the 15.15 billion euros initially estimated.

The Spanish government will not budge from its vow to slash the public deficit from the equivalent of 9.2 percent of gross domestic product last year to 6.0 percent of GDP this year, Salgado said.

"The six percent of the deficit -- we have always said that this target is irreversible," she said.

© 2011 AFP

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