25th Sep 2020

Top politicians: Spain is not Portugal

  • Barcelona cathedral. Moody's has fears about Spanish banks' balance sheets, but markets seem unfazed so far by events in neighbouring Portugal (Photo: vgm8383)

Amid speculation that Portugal will soon become the third eurozone state to apply for a sovereign bail-out, Spanish figures have been wheeled out to stress the difference between the two Iberian neighbours.

Spain's man in the European Commission and the man in charge of EU competition policy, Joaquin Almunia, on Thursday (25 March) said that Madrid's cutbacks and restructuring was successful in convincing markets of the country's resiliency.

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"The evolution of (economic) indicators in Spain is clearly separate from other countries such as Portugal, Ireland or Greece,' he said in the Spanish capital, according to DPA.

His said that the austerity imposed by the government had already "produced results" and would "win against attempts at speculation."

The comments follow similar words from industry minister Miguel Sebastian the previous day, who declared: "The original sin of Europe was to consider Portugal, Italy, Ireland, Greece and Spain as a club."

On Thursday, Moody's credit rating agency downgraded senior debt and deposit ratings of 30 local banks, or cajas, in the country.

The agency gave warning that the central government may not be able to inject cash into every caja that is confronted with losses.

The three biggest banks avoided any downgrade, but 15 of the smaller outfits saw their ratings pegged downward by two notches and five had their ratings cut by three or four notches.

The firm also hinted that further downgrades are likely.

The move comes a fortnight after the agency cut the country's sovereign rating.

Spanish banks are the most exposed to the crisis in Portugal, with about a third of the total exposure of foreign banks.

As a result of the Portuguese situation, pressure has mounted on the local banks, with the cajas speaking to hedge funds and private equity outfits to attempt to source fresh sources of cash.

However, also on Thursday, markets seem to shrug off the idea of fall-out from Portugal, that Spain would also have to go cap in hand to Brussels and the IMF.

"Spain seems to have successfully separated itself from the pack of troubled member states. Let us hope it stays this way," analyst Sony Kapoor said of the situation.

Meanwhile Spain is expected to present a fresh round of austerity measures at the EU summit in Brussels.

The measures will likely include some 12 new actions to convince markets and fellow EU states of its credit worthiness.

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