Spanish Economy Minister Luis de Gindos will introduce measures to further budgetary savings to be realized in the country, told his colleagues from the eurozone, thus removing obstacles to obtaining additional year to achieve the budgetary targets in the fourth-largest economy in the region, said diplomats said.
Although no final decision is expected to bailout the Spanish banking sector of today’s meeting of the council of finance ministers of the Member States of the euro area (so-called Eurogroup), then of tomorrow, which will be attended by their counterparts from the European Union , provides that the purpose of Spain to reach the budget deficit within 3% of gross domestic product to be relieved as the date of execution, as pressure on the economy and exacerbated the recession.
“The goal of Spain’s budgetary consolidation will be adjusted to provide her an extra year,” said one of the diplomats. “This is not unilateral action. Spain will have to make the necessary savings to achieve this goal and that will be discussed Tuesday at a meeting of ECOFIN. I expect one year to be approved, “he added.
At its meeting on Tuesday, December Gindos will present the government’s plan for new savings of 30 billion euros over the next few years, which includes spending cuts and tax increases and to be officially announced on Wednesday.
A source close to the Spanish government said that 10 billion to be saved this year and the measures will include the VAT increase, cuts to social assistance and unemployment benefits, and changes in pension calculations.
In return, Spain will get another year or until the end of 2014 to fit the requirements of the EU’s budget deficit. While providing this discount to take part of the pressure on the country, it was expected.
This month should be taken and the decision to all details of bailout for the Spanish banking sector.
Source of the Spanish government said in Brussels today will sign a memorandum of understanding regarding the agreed bailout worth 100 billion euros, which will be followed by a full loan agreement of 20 July. Under the plan the government will agree to a common bank for bad assets throughout the Spanish financial sector.
Spanish Foreign Minister Jose Manuel Garcia-Margayo urged the European Central Bank to act to relieve market pressures on the country by buying its bonds because the cost of increasing its lending.
“At this moment the only institution which has sufficient funds to operate, is the ECB,” said Garcia-Margayo a press conference today. “This is why the ECB should intervene in the market should start large-scale purchases of public debt, so that speculators understand that they will lose their bets against the euro,” he added.
Besides Spain, the finance ministers of eurozone countries will have to seek a solution for the new structure for general banking supervision within the region, the problem how to use funds from the rescue funds to help Cyprus and whether to make concessions to Greece already admitted that he has fulfilled his part of the objectives agreed in the rescue program for the country.
A key part of the plan, which leaders of the eurozone countries agreed in late June, is to provide the ECB’s central role in banking supervision, which will then allow the permanent rescue fund for the region – the European Stability Mechanism (EMC) – to recapitalize banks directly, instead of going through national governments.
The idea is breaking the link between banks and the national debt, as governments are not loaded with additional duties to rescue the credit institutions in their respective countries, as this makes it more difficult borrowing on capital markets.
ECB’s role as supervisor of the banking system would require legislative change in the European Union. The proposal for such changes must come from the European Commission is not expected to happen before September.
Leaders also agreed to abolish the status of EMC as a privileged creditor, when in Spain provides funds to reassure investors who are worried that they will be able to return funds already provided.