Spain’s banking system is well on its way to meeting Basel III requirements
MADRID: Amid spreading fears of additional nations falling victim to the European debt crisis, Spain's Prime Minister Jose Luis Rodriguez Zapatero told about his confidence in his country's latest reforms. Despite the latest quarter showing a contracting economy and a 20 percent unemployment rate, Zapatero expects Spain to see growth in the coming year. The Prime Minister denied rumors of potential real estate writedowns, adding that Spain's banking system is well on its way to meeting Basel III requirements.
"[Our banking system] is definitely healthy," Zapatero said. "It's not only healthy and well-capitalized, it's done its homework ... and on top of that, it will be one of the most attractive financial systems for investments."
Spain is in talks with sovereign wealth managers to put fresh capital to work in the country.
As for bondholders, Zapatero maintains that Spain's treasury's are among the top rated, and "no one will have to take a haircut."
Earlier Wednesday, Zapatero said Spain would sell off more state assets and axe a jobless benefit, stepping up efforts to slash costs and persuade markets it will not need a bailout as its prime minister pulled out of a summit in Latin America.
Zapatero said he was ending a payment for the longterm unemployed worth 426 euros a month, a year after it was introduced for claimants whose benefit had run out. He also said Madrid would sell 30 percent of its state lottery, let private companies take 49 percent stakes in airports and airport services, and move to support small and mediumsized firms.
News of the cuts was well received in Brussels, which risks facing an insurmountable bill if Spain and other large economies apply for EU funds.
Spain's major index rose 4.4 percent on Wednesday, lifting other European markets.
Premiums on Spanish bonds fell along with spreads on other euro zone peripheral debt, having received a hammering since Ireland agreed on outside help on Sunday.
Zapatero has been careful not to spook nervous markets with sweeping new initiatives, which might be seen as a sign of panic, and instead drip-fed actions over the last week to show his government means business.
The premium investors demand to hold Spanish over German touched euro-era records on Tuesday but fell back on Wednesday as traders bet the European Central Bank could offer more stimulus by increasing its bond-buying program.
Spain had one of the highest public deficits in the euro zone in 2009 of 11.1 percent and has passed austerity plans and introduced spending cuts as part of next year's budget worth around 50 billion euros to reduce the shortfall.
Spanish unemployment fell for the first time in over 3 years in the third quarter but remains the highest in the euro zone at 19.8pc. -PB News
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