It came as great news in Madrid and Dublin: both Spain and Ireland will not seek extensions of their aid plans, a sign that both countries are on their path to recovery and the euro zone is little by little coming out of a four-year-agony. Spain will be able to stand on its own feet next January. As EU Economy and Euro Commissioner Olli Rehn said on Thursday, the country’s financial market has stabilised, liquidity of banks have improved and deposits are rising. There is still homework to do, indeed, like restructuring Spain’s local savings banks.
In Brussels, Spain’s Finance Minister Luis de Guindos said on Thursday that “the closure of Spain’s banking bailout is good news for both the Spanish and the European economy.” “This is a clean break, and now we have a banking system that is more solid and more solvent, with every indicator pointing in the right direction,” he added.
Irish Prime Minister Enda Kenny, he showed his enthusiasm too: “This is the latest in a series of steps to return Ireland to normal economic, budgetary and funding conditions.”
Spain borrowed some €40 billion from the euro zone in 2012 to recapitalize its failing savings banks and Dublin was forced to ask for €67.5 billion in loans from the International Monetary Fund and the European Union two years before. Nor both countries want to stand on their own feet. The truth is, they will need to manage very high debt levels: Ireland’s is projected to hit 124% of GDP by the end of year, while Spain’s will likely reach 94% of GDP, in addition to record unemployment and big deficits. But their financial institutions are struggling to return to profitability.
As for their neighbors, Greece, Portugal and Cyprus, the future remains unclear.
*Image: EFE/Nicolas Bouvy