Spain's jobless near 5 million as banks await cash
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 (EURO)39.5 billion ($51.6 billion) in bailout aid for Spanish banks worst hit by the property market collapse in 2008.
The funds are part of a (EURO)100 billion rescue package earmarked for Spain's banks that was agreed with the other 16 European Union countries that use the euro back in June. The loan package 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.
The (EURO)39.5 billion figure includes (EURO)37 billion 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 (EURO)18 billion, Catalunya Caixa (EURO)9 billion, Novagalicia (EURO)5.5 billion and Valencia Bank (EURO)4.5 billion.
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.
The ministers also approved (EURO)2.5 billion to help fund Sareb, Spain's recently set-up bad bank.
Many analysts think that Spain's banks will need much more 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 (EURO)60 billion 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 - were found in audit to be not fully capable of surviving a serious economic downturn. They are due 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 (EURO)1.5 billion for these banks.
In a positive signal for Spain's deficit-reduction efforts, the country's 17 semiautonomous regions managed to improve their finances in the first nine months of the year.
The Finance Ministry said their joint deficit stood at 1.14 percent of Spain's gross domestic product at the end of September. In the same period last year, it was 2.2 percent and ended 2011 at 3.3 percent, contributing to Spain's debt woes. The central government has set them a target of 1.5 percent for 2012.