what to do in spain

Independent auditors state that in the worst possible scenario the Spanish banking system would need up to €62 billion. The Eurozone agreed to put at Spain’s disposal up to €100 billion if needed. In the most likely scenario, the Spanish banking system would require between €16 billion and €25.6 billion. Within the most stressed case, Spain’s three main banks would have enough resources of their own to face difficulties and would not need any additional funding. They are the Barcelona-based CaixaBank and the two international giants BBVA and Banco Santander.

According to the Bank of Spain’s Deputy Governor, the Catalan bank would need an additional amount of €4.5 billion to meet the capital requirements of the last decree approved by the Spanish Government. Before this announcement, the Spanish State had already allocated €2.97 billion to rescue CatalunyaCaixa. Novagalicia would also need €4.5 billion. Combined, these €9 billion are to be added to the €19 billion for Bankia. The Spanish Government refuses to give the total figure required by the entire banking system, as it waits for the independent audit’s results. However, the IMF leaked that Spanish banks might need €40 billion.

The President of the Catalan Government has organised a summit with all the parties at the Catalan Parliament to discuss a new fiscal scheme for Catalonia. According to official studies, Catalonia gives 8.5% of its GDP each year to pay for investments and services in the rest of Spain, an amount that represents more than €17 billion per year. Some parties state that the current model is unsustainable for Catalonia and represents a plundering of its finances. Others have a more moderate opinion. Nonetheless, all political parties in Catalonia now believe that this amount is excessive and that the fiscal scheme between Catalonia and the rest of Spain should be reviewed. However, they significantly disagree on the formula and the timing.

Josep Oliu, President of Banc Sabadell, thinks that if somebody is to be made responsible for the current crisis, a thorough analysis of the decisions of sector managers during the 2003-2007 period should be made, and not among those currently in charge. Oliu, who has been a banker “all his life”, feels he is a “victim” of a situation provoked by managers who were “not acting as bankers”. The Catalan banker recognised that the Spanish banking system can still face the new requirements on its own but it is getting “closer to the limit of its own economic capacity”. Besides, Oliu was very satisfied with the European Commission’s green light for CAM’s integration into Banc Sabadell’s business.

Using its absolute majority, the People’s Party (PP) has approved the Spanish Government’s budget for the current year refusing 3,100 amendments from the opposition. Only 3 minor amendments from the opposition parties have been accepted. The budget does not respect the current legislation, which obliges to guarantee a minimum investment percentage to be made in Catalonia in order to compensate for an historical lack of money being put into the Autonomous Community. According to Catalan law, approved by the Spanish Parliament, Catalonia should receive at least 18.66% of all the territorial investment made throughout Spain; however it only receives 11.04%.

The Catalan Government has announced a plan against the Spanish Government’s “recentralisation offensive”. One of its actions is taking the education and healthcare reforms adopted by Madrid to the Catalan Council for Constitutional Guarantees, as a first step to bring them to Spain’s Constitutional Court. The Catalan Government believes that some of the measures invade its jurisdiction, as it directly manages education and healthcare. Another measure is issuing a report pointing out the Spanish Government’s duplicities, such as maintaining ministries such as education, healthcare and culture. These policies are managed by the Autonomies. Left-Wing opposition parties have urged the Catalan Government to take further measures, while the PP has accused the Catalan Executive of “lying”.

Coinciding with the European Central Bank Governing Council organised in Barcelona, the President of the Catalan Government, Artur Mas, met with Mario Draghi and other members of the ECB Governing Council. Mas took the opportunity to explain to the ECB the Catalan Government’s austerity measures and its efforts to reduce Catalonia’s public deficit. He also spoke of his party’s support to all the reforms taken at Spanish level, despite being unpopular. However, Mas warned the ECB President that reducing the deficit too fast in the middle of an economic recession might worsen the crisis.

During the first quarter of the year, the Catalan bank placed €293 million in provisions to strengthen its financial position. Despite the provision, Banc Sabadell had a net profit of €80 million in the first 3 months of 2012, which represents a 5% decrease when compared to the same period last year. The CEO of Banc Sabadell said that creating a “bad bank” in Spain to manage real estate assets is “unnecessary”, as the Catalan bank is “self-sufficient” and is “satisfied” with the management of its own real estate assets.

The Dutch newspaper NRC Handelsblad has published an interview with the President of the Catalan Government, Artur Mas. Mas states that “Catalonia’s intervention by Spain would be unthinkable” and “unfair, as no government has done as much as Catalonia's to adjust the economic situation”. Furthermore, he adds that “people’s reaction [against such an intervention] would be very strong”. NRC explains the austerity measures implemented by the Catalan Government to reduce its deficit, such as the drug prescription fee or public employee salary reduction. Furthermore, Mas complained that Spain’s Autonomies model has “decentralised spending but not revenue”; “we want to collect our taxes”, he affirmed, being another “state within a federal Europe”, contributing to regional solidarity.

In an interview with the Catalan Public Television Broadcaster, the Catalan President and leader of the Centre-Right Catalan Nationalist Coalition (CiU) recognised that the Spanish Government could intervene the Catalan Government. “It could happen, I won't deny it”, he said. Furthermore, he warned that “the mistrust level will be very high” if the Spanish Government does not pay the money it owes the Catalan Executive. Mas said that “if Madrid wants to intervene Catalonia’s self-government”, he would call early elections. In addition, he said that further budget cuts will be needed.

The bank created from Catalan savings bank CatalunyaCaixa is expected to be sold within the next two months. CatalunyaCaixa was intervened by the Bank of Spain last September 30th, as it could not reach the required core capital. The Spanish Fund for Orderly Bank Restructuring (FROB), owned by the Spanish State, currently owns 89.74% of CatalunyaBanc. The FROB has decided to disinvest in the Catalan bank, which starts a competition process that will sell 100% of CatalunyaBanc’s shares.

The Spanish Minister for the Economy, Luís de Guindos, wants to speed up the process and have the entire Spanish banking system restructured before the summer. The Spanish Minister also said that he is expecting further concentration processes of other financial entities to be announced in the coming weeks. CatalunyaCaixa’s banking business had a profit of €304 million, although the €1.5 billion provisions for the real estate business caused a €1.34 billion loss in 2011.

Banca Cívica has accepted the offer from the Catalan bank to pay €1.97 per share. With this operation, CaixaBank, the private bank created last year by the Catalan savings bank ‘La Caixa’, becomes Spain’s largest financial entity, ahead of BBVA and Banco Santander. After buying Banca Cívica, CaixaBank will have more than €342.6 billion in assets in the Spanish market. Banca Cívica was the merger of four savings banks: Caja Navarra, Caja Canarias, Caja de Burgos and Cajasol.

‘Convergència Democràtica de Catalunya’ (CDC), the Liberal force within the two-party Centre-Right Catalan Nationalist Coalition ‘Convergència i Unió’ (CiU), held its party congress over the weekend. For the first time in its history, CDC has claimed for Catalonia to have its “own state” in order “to avoid being erased off the map of cultures, languages, and world nations” as “Spain threatens Catalonia” and is no longer a “project that can be shared”. The current President of the Catalan Government and until last weekend the CDC Secretary General, Artur Mas, has now become the party Chairman. Oriol Pujol, son of the former Catalan president Jordi Pujol and Mas' close collaborator, has been elected the new Secretary General with 97.8% of the votes.

In 2009, Catalonia financed € 16.41 billion of services and investments in the rest of Spain, which represents 8.4% of Catalonia’s GDP. According to the Catalan Finance Minister, Andreu Mas-Colell, out of every euro paid by Catalan citizens with their taxes, 43 cent is invested outside of Catalonia. The Catalan Government released the latest data regarding the fiscal relationship between Catalonia and Spain, corresponding to the 2006-2009 period, known as “the fiscal balances”. Mas-Colell underlined the “fiscal deficit” Catalonia suffers from, which is “unsustainable” and harms Catalan citizens and the country’s economy.