Conclusions in the European troika’s report about the Spanish banks bailout (or rather cajas bailout) are –as so often- ambiguous: it was good, but not so much. The objectives have been met, homework has more than fulfilled expectations… but we can’t and must not drop our guard. The report warns about the lack of credit.
And without credit, there is no future: banks make a living out of credit and transactions. From a lack of respect for risks, we have gone to an increasing fear of risks. It is legitimate and logic, but it can be dangerous: credit is necessary for the recovery. And the European troika’s report has little faith in a recovery.
The set of indicators in Annex 1 forecasts a Spanish growth of 0.5% in 2014 with an unemployment rate above 26% (maybe a couple of tenths less than this year, due to decreases in workers –not to increases), and the Organisation for Economic Co-operation and Development (OECD) agrees with these estimates.
However, the Spanish government is much more ambitious. And, despite the budget indicates that the GDP will grow by 0.7%, PM Mariano Rajoy pursues more than one point together with net job creation since next summer.
Time will tell which forecast was the most accurate. Spanish market watchers’ previsions are more optimistic than those of the Troika –at least regarding headlines and conclusions, although if we look at the small print we find their reports are quite alike.
It is essential for the banking sector restoring growth because without a real recovery, their accounts are doomed to mediocrity. Besides, solvency is threatened with poor results, which means there is a risk to start all over again.
The European stress tests are mainly focused on solvency and almost forget about profitability. It is obvious that without solvency there is no future, but much less so if there is no profitability. That’s why it’s understandable all the caution found in the report. However, European and Spanish data are mediocre and in a stagnant economy, the banking sector has little future.
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