Spanish leaders blame banks for worsening economy
The government blames banks for tightening credit, causing small business to face bankruptcy issues.MADRID – Overwhelmed by a deepening economic contraction and a sharp rise in unemployment, the Spanish government has pointed the finger at the banks, blaming them of making the situation worse by tightening credit.
"Banks become scapegoats," business daily Expansion wrote in a headline on Wednesday, one day after official data showed the economy shed nearly 200,000 jobs last month and Industry Minister Miguel Sebastian attacked the banks.
"The government is losing its patience with the banks," Sebastian said just hours after the labour ministry said the number of people out of work in Spain rose to over 3.3 million as of the end of January, a 12-year high.
Many small businesses complain they are facing bankruptcy because they are not able to get credit while consumers report growing difficulties in securing a mortgage or a loan to buy a new car or other big ticket items.
Javier Gomez-Navarro, the chairman of the Spanish chamber of commerce, said Wednesday that 80 percent of all small- and medium-sized businesses which approached banks during the part three months reported difficulties in obtaining financing.
Socialist Prime Minister Jose Luis Rodriguez Zapatero met the heads of the country's six largest banks on Monday for over three hours to urge them to boost credit to families and companies to help revive the economy.
"I will tell them, with all my power and conviction, that this is not the time for large profits. It's the time to support credit and financing for families and companies in this country," he said on the eve of the meeting.
Spanish banks have largely avoided some of the problems in the US home loan derivatives market that have sunk many of their peers but they are feeling the effects of a domestic real estate market collapse.
The banks say requests for loans have fallen due to the economic slowdown and they argue they have had to tighten credit conditions as a precaution as the country faces its first recession in 15 years.
The government has promised to guarantee interbank lending up to EUR 100 billion in 2009, the same amount as last year, and has a special fund of EUR 50 billion for acquiring bank shares in order to make cash directly available to the lenders.
But the main opposition Popular Party says the government made a huge mistake by providing funds to banks without demanding guarantees from them that they would boost credit.
"First you set the conditions, then you provide the money, not the other way around," the party's congress spokeswoman, Soraya Saenz de Santamaria, said Wednesday.
Rosa Diez, a member of parliament with the new centrist UPD party, said the government should follow the lead of other nations and take a stake in the banks to ensure they continue lending.
"Other nations have bought their shares. They have appointed a man or woman from the government to the management board to control the money and the destination of these funds," she said.
BBVA, Spain's second-largest bank, announced Wednesday that it would make EUR 5.5 billion available in credit to small- and medium-sized businesses.
The bank took part in the meeting with Zapatero along with Banco Popular, La Caixa, Bancaja, Caja Madrid and Santander, the largest bank in the eurozone.
In January, the government slashed its forecast for the Spanish economy, the fifth-largest in Europe, to a contraction of 1.6 percent this year from the growth of 1.0 percent previously forecast.
[AFP / Expatica]