Spain's Jobless Number Nears 5 Million as Banks Await Cash

Tuesday, 04 Dec 2012 07:57 AM

 

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The number of people officially registered as unemployed in Spain has edged up toward 5 million as the country's recession shows few signs of abating and its struggling banks await crucial bailout cash.

Spain's Labor Ministry said Tuesday that unemployment rose a monthly 74,296 in November, or 1.5 percent, to a record 4.9 million. The country's unemployment rate is released separately and quarterly. It stood at 25 percent at the end of the third quarter, with the youth unemployment rate standing well above 50 percent.

The figures come a day after finance ministers from Spain's euro partners approved the release of 39.5 billion euros ($51.6 billion) in bailout aid for Spanish banks worst hit by the property market collapse in 2008.

The funds are part of a 100 billion euro rescue package earmarked for Spain's banks that is designed to ease the pressure on the Spanish government so it can concentrate on managing the national finances as well as those of the regions and avoid a full-blown sovereign bailout similar to those sought by Greece, Ireland and Portugal.

The 39.5 billion euro figure includes 37 billion euros in loans for four banks already nationalized by the Spanish government. The money is to begin arriving next week. Under the deal, Bankia will get 18 billion euros, Catalunya Caixa 9 billion euros, Novagalicia 5.5 billion euros and Valencia Bank 4.5 billion euros.

In return, the entities must reduce the size of their business by 60 percent, branch numbers by 50 percent, stop lending to real estate development and concentrate on retail loans and those to small and medium-sized companies in their base regions.

"The implementation of the program is on track," said Jean-Claude Juncker, the Luxembourg prime minister who heads the eurogroup of finance ministers, a post he said he will step down from early 2013.

The ministers also approved €2.5 billion to help fund Sareb, Spain's recently set up bad bank.

Many analysts think that Spain's banks will need much over the months ahead to deal with their myriad of problems. In September, an independent audit commissioned by Spain estimated that the country's troubled banks would need 60 billion euros to survive a serious downturn.

"One can't help feeling that the amount being asked for could be one of many requests over the coming months," said Michael Hewson, markets analyst at CMC Markets. "With the aid being conditional on sweeping job cuts in excess of 6,000, and bank branch closures across the country the effects are likely to be felt across the entire Spanish economy, which is already seeing tax revenues shrink sharply."

Another four banks — Mare Nostrum, Banco Caja 3, Liberbank and Ceiss — not deemed fully capable of surviving a serious economic downturn are to present restructuring plans before Dec. 20 in order to receive rescue funds. On Monday. Spanish Economy Minister Luis de Guindos applied to the eurozone for 1.5 billion euros for these banks.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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