Spain, forced to create a “bad bank” fund that would group it’s financial sector’s massive losses, has postponed legislation compiling its liabilities until the next Cabinet meeting on Aug. 31.
The European Commission requested Spain to delay the legislation so that financial experts from Brussels would have time to review the project, according to a Boston.com report.
In order to get a loan for as much as €100 billion ($125.5 billion) from 16 other countries using the euro, Spain must create the “bad Bank” fund to salvage its largest failing banks. The European Commission has set the “bad bank” legislation as a condition for the loan(s).
Spain’s economy has spiraled downward since the collapse of the property market in 2008 and economic analysts say the country’s heavily nationalized banks may collapse under bad debt without an unprecedented loan bailout.
Madrid has maneuvered for months to avoid following Greece, Ireland, Portugal and Cyprus in asking to be rescued from government/bank debt. Prime Minister Mariano Rajoy recently conceded that he would consider approaching the eurozone’s bailout fund for such government assistance.
While Rajoy seems to have few options, he made his own condition clear: The European Central Bank must outline its plans to help bring down the country’s sky-high borrowing costs.
Investors have left Spain in droves over doubt that the country can even afford the loans to save its banking sector and debt-laden regional governments. Some say Rajoy has been too slow in reacting to the financial meltdown.
Meanwhile, investors would impose high interest rates on the Spanish government due to its shaky financial foundations, high cost of government services and enormous debt. The uncertainty of recent events is also putting more pressure on the country to cut public spending to put its financial house in order.
Some financial experts contend Spain must eventually accept EU rescue loans and that the bailout is about the only way to boost investor confidence in the country,
However Friday’s Cabinet meeting produced mixed results for Spain’s near 6 million unemployed. Unemployment payments for long-term unemployed people were extended for those receiving monthly payments of €400. Unemployment payments were boosted to €450 for those who have at least three dependents.
However, the government cut off payments for those living in households with overall incomes of more than €481 ($602) a month per person. After Aug. 16, this income will include income of parents and, or, grandparents living in the same dwelling.