The European Commission and the European Central Bank (ECB) have warned Thursday -in its second monitoring report after the end of the banking rescue of 41,300 million euros that Spain remains “vulnerable” to sudden changes in confidence of international investors. The EU inspectors criticized the delays of the Government of Mariano Rajoy in reforms, in particular labor and the new law to liberalize professional services.
The report-the result sight inspectors Brussels and the ECB held in Madrid from 6 to 10 October- emphasizes that the economic recovery in Spain “has gained momentum” in 2014 and that GDP will “continue to grow faster than the average for the eurozone”. The resilience of the financial sector, “continues reinforcing” and credit begins to grow in some segments, particularly SMEs.
However, inspectors warn that Spain “remains vulnerable to sudden changes in confidence of international investors, “as the turmoil in mid-October or the current volatility caused by Greece. They also emphasize that “the weakening of activity in the rest of the eurozone poses risks to the economic recovery in Spain”. “It is important to remain vigilant, because large imbalances pre-crisis period and political challenges in the labor market and beyond are still substantial, and some important reforms have not yet been completed”, notified the Commission and the ECB.
Labour reforms
In terms of labor reforms, the report claims that “the implementation of measures to increase the effectiveness of active employment policies in reducing unemployment Progress is being made only gradually “. “Because of the shared powers and considerable inertia of the system, this is proven to be a complex and lengthy process, whose impact on the ground immediately feel” he says.
The Commission and the ECB also regret that “no new reforms envisaged to address the high degree of duality in the labor market.” In his view, the flat rate contribution to social security for new permanent contracts “has had a limited impact so far.” And the “significant increase” of total social spending and specific measures to support the most vulnerable “have proven insufficient to offset the impact of the crisis and rising unemployment in social indicators”.
Professional Services
The EU inspectors criticized that “the submission to Parliament of the reform of professional services still delayed”. “The bill should be presented soon if it is to have the ability to be approved before the end of the legislature. At the same time, it is important to maintain the level of ambition of this reform,” they write.
In fact, the report details the elements that, according Brussels and the ECB should include the law. First, you must limit the number of professions required to cases where this is justified and proportionate collegiality. You must also ensure that membership fees and registration to these professional associations does not create barriers to competition.
The Most
In addition, EU inspectors require law increases the transparency and accountability of professional associations in front of consumers of these services and their own members. Finally, reform must ensure the unity of market access and exercise of professional services.
Criticism tax reform
The report and Brussels ECB again complains tax reform Government Mariano Rajoy, which comes into force in 2015, arguing that “it is not ambitious and comprehensive that could have been” and is “a partially missed opportunity to significantly simplify and fix deficiencies in the tax system and to substantially reduce taxation on labor “. Also, “you can make fiscal consolidation more difficult.”
The inspectors reported that the Ministry of Finance is not applied in a sufficiently strict law of budgetary stability to force further adjustments to the regions.
“The enforcement of market unit must be accelerated,” also claims the report, warning of possible further delays as a result of the regional elections. Also, Brussels and the ECB regret the delay in approving the law of indexation and demand more measures to reduce the bureaucratic burden on companies or facilitate the opening of trade. Also doubt the independence of the new Observatory Transport and Logistics when advising the Government on new infrastructure projects.
Problems SAREB
As regards the banking sector, the report notes that the liquidity situation of Spanish banks has continued to improve and solvency has been strengthened thanks to higher profits for the first half of 2014. The average asset quality has started to improve thanks to the delinquency begins to fall.
“Private credit continues to contract although a decreasing rate. In some segments, especially in SME lending, new credit has started to grow. However, lending volumes are still falling in the main areas of business (albeit at a slower pace), putting pressure on profitability prospects of the banking business, “say the inspectors.
The restructuring of banks that have received state aid is progressing. In June, the Commission approved the sale of NCG Banco to Banesco group and is now negotiating with BBVA changes in the restructuring plan of Catalunya Banc, the entity chaired by Francisco González acquired in July. In addition, already underway preparations to sell FROB participation in BMN, possibly through a sale on the stock market from next year. However, the report notes that in the case of Bankia, following the sale of 7.5% in February, have not materialized privatization plans.
As for the Manager of Assets from of bank restructuring (SAREB), the report notes that sales continue “at a moderate pace” and concentrate on key areas such as Barcelona, Madrid, Malaga and Alicante. “SAREB is still struggling to gain profitability. In future, more sustained stabilization in the housing market should allow SAREB progressively gain profitability,” he says.
“Based on the analysis in this report, the risks of reimbursement for the loan from the European Stability Mechanism are very low at this time, “the report concludes. Currently, Spain has returned in advance of the bank bailout 1,300 million and 300 million unused by SAREB and has outstanding 39,700 million.
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