MADRID Oct 2 The European Union must do more to
get credit flowing in Spain and other southern member states, EU
Economic and Monetary Affairs Commissioner Olli Rehn said in an
interview published on Wednesday.
Spain's economic prospects are improving "modestly", Rehn
told Spanish newspaper Expansion, and that should lead to a
gradual recuperation in credit, but this must be supported by
"I am referring to the banking union, which will bring back
confidence to the financial sector, possible decisions by the
ECB and the European initiative with the EIB to boost loans to
SMEs," he said.
"I kindly ask member states to take a strong and coherent
position in favour of this initiative to unblock the worst
bottleneck for economic growth, especially in southern Europe,
where credit conditions are too strict for small and medium
enterprises in Spain, Italy and other countries."
The European Central Bank concludes its monthly meeting on
Wednesday, with investors looking for any new hints on whether
it could offer new long-term unlimited loans to banks (LTROs) to
keep banking liquidity ample and short-term interest rates low.
Debt held by Spanish companies dropped for the 29th straight
month in August to the lowest level since March 2007, with the
credit crunch hitting small businesses particularly hard,
according to Bank of Spain figures.
He did not give any details on what the initiative would
Countries should be supported by the European Union's move
towards banking union, as well as possible action from the
European Central Bank (ECB) and the European Investment Bank
Rehn reiterated that Spain may not need further aid for its
financial sector after a 41 billion euro ($55.45 billion)
bailout last year.
"It seems to me that Spain is in a position where it is
managing that alone and will not need more programmes once this
one expires," Rehn told Expansion.
The commissioner said the biggest risk he saw for Spanish
banks was the economic situation, though if it evolves
positively, as expected by the government, there will be no need
for dramatic recapitalisation of entities in the country.
Spain's recession-plagued economy is expected to have grown
for the first time in two years in the third quarter, according
to government estimates, lifted by strong exports as companies
look abroad to offset losses due to dire demand at home.
Rehn also said that Spain's 2014 budget, presented earlier
this week "seems to be based on reasonable scenarios and
estimates at first glance". A more detailed analysis will be
presented in mid-November.
He urged Spain's government to focus on cost-cutting and
avoid raising taxes, after a series of increases, including on
income tax and value-added tax (VAT).
"New tax raises would have a very damaging effect on the
economy," Rehn said.