BRUSSELS The European Union's top economic official said on Sunday that Spain was taking decisive action to shore up its banking sector and that its overall reform efforts were essential to bolster confidence in the sector.
Spain on Friday offered high-interest loans to banks suffering the fallout of a property crash and ordered an independent audit of lending across the entire banking sector. But the attempt to plug a hole in the country's banking system fell short of expectations.
Olli Rehn, Europe's commissioner for economic and monetary affairs, praised the plan in a statement.
"These actions should dispel the lingering doubts about the stability of the Spanish banking sector," he said.
"The combination of increased provisioning against potential future losses, segregation of troubled assets, independent validation of balance sheets, and the availability of necessary public funds to support the overall reform effort is essential in order to reinforce investor confidence in Spanish banks," he said.
Rehn said the European Commission, the EU executive, would continue to cooperate closely with Spanish authorities reform, and that measures implying state aid would have to be analyzed and approved by the Commission.
"A prompt and profound reform of the banking sector is a cornerstone of Spain's crisis response and its overall reform strategy," he said. "It is an indispensable supplement of the determined fiscal consolidation and front-loaded structural reforms that can bring sustainable growth and more and better jobs."
(Reporting By Sebastian Moffett, editing by William Hardy)