Minister plays down Spanish debt woes

“The process of transparency we have done in Spain over the last month has been the most notable one in Europe,” he said.
Spain has done very important work in financial industry reform. Two independent evaluators have appraised the bank’s recapitalisation needs. The two independent evaluators and European authorities have come up with the conclusion that 70 per cent of the financial industry is healthy even in the extreme and stressed situation, he said.
There is 30 per cent of the financial industry that needs to be recapitalised.
They will require about 40 billion euros. The maximum is 60 billion euros but the financing will be much less, or about 40 billion euros, which is about 4 per cent of gross domestic product.
This will not have an impact on the stability of Spanish debt, he said.
Over the next week the Spanish government will |discuss with the European Commission whether to approve the plans of those banks in the country that need recapitalisation.
The government will |proceed with this recapitalisation next week and will tap |the European Stability Mechanism. The government also has guaranteed the treasury bonds that will be used to recapitalise Spanish banks. The International Monetary Fund will not be involved in this exercise, Fernandez de Mesa said.
Turning to the Asia-Europe Finance Ministers’ Meeting here in Bangkok, he said it was very important for both groups of countries to understand well where the two regions are, what reforms are taking place in Europe and what new developments are going on in Asia, as both groups are a big part of the world economy. For both regions, having a strong flow of goods and services and free financial flows is very important, he said.
Each side should learn the lessons of the other to avoid mistakes in the future, Fernandez de Mesa said. The most important things is that Europe has a lot of experience in making mistakes that have to be overcome and Europe also has positive experiences.
Europe has been undertaking many important reforms to make the economy more competitive. These include financial industry and fiscal reforms to ensure fiscal sustainability.
Asian firms can find good investment opportunities in Spain, which holds out transparency, the capacity to manage risks, and good returns.
“This is probably the best promotion that we offer for investors to come in – that you have stability, transparency and good returns,” Fernandez de Mesa said.
The Spanish economy is very diversified. The country has a productive base. It also has multinational firms that are very active in the international market.
The country has run current account deficits over the past year and the government has corrected the imbalance sharply this year. The current account should show a surplus or be balanced few years from now, he said.