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Spain's fund to shore up banks will raise public debt
Oct 8, 2008, 9:33 GMT
Madrid - Spain's new fund to shore up banks facing the international financial crisis will raise public debt by up to 2.8 percentage points to a maximum of 41.6 per cent of gross domestic product (GDP) in 2009, officials said Wednesday.
Prime Minister Jose Luis Rodriguez Zapatero on Tuesday announced the creation of a government fund of 30 billion euros (41 billion dollars) to buy assets from banks and to thus support lending to companies and individuals.
The fund can be increased to 50 billion euros, in which case it would be proportionate with the US plan to buy bad debt, with the difference that Spain will only buy healthy bank assets, analysts said.
The fund was not aimed at ensuring solvency, but at injecting liquidity into the financial system in an attempt to pre-empt risks, Zapatero said.
The government has stressed the solidity of Spanish banks in comparison with other European countries. Banks are nevertheless facing liquidity problems as the country's once-booming property sector collapses.
The debt level of slightly over 40 per cent was still low in comparison with the European average of about 60 per cent, treasury secretary of state Carlos Ocana said.
Spain will also increase its guarantees for bank deposits from 20,000 to 100,000 euros per account holder and bank.
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