Spain was given the go-ahead Tuesday to exit its bailout programme by the Eurozone’s rescue authority, a year and a half after the country was granted an aid package to shore up its troubled banking sector.
With the end of the programme, Spain will become the second of the Eurozone’s five bailout beneficiaries to no longer need outside help. Ireland completed its aid programme on December 15.
Spain’s official bailout exit is not scheduled until January, the (DPA) reported.
Tuesday only marked the expiry of its aid programme from the European Stability Mechanism (ESM), the Eurozone’s permanent rescue fund.
Spanish banks had been left burdened with toxic real estate assets after the country’s key property sector collapsed during the global financial crisis, plunging Spain into a six-year economic slump.
Madrid secured a loan of up to 100 billion euros (138 billion dollars) in mid-2012 for its banking sector, but ended up using only 41.3 billion euros.
ESM chief Klaus Regling called Spain’s bailout exit “an impressive success story.” “Spain’s troubled banks … are today on a sound footing,” he said in a statement.
“The government’s determined reform efforts and the people’s readiness to accept temporary hardship for the sake of a sustainable recovery are exemplary.” “Despite the challenges ahead, I am confident that the ESM’s support, combined with structural reforms, will allow the Spanish economy to achieve stability and substantial growth,” he added.
The European Commission and the European Central Bank had warned in mid-December that Spain still needs to monitor its banking sector’s shock resiliency and solvency, as they wrapped up their last review of the bailout programme.
They also pointed to the heavy debt burdens that continue to weigh on lending to the private economy, and the yet-to-be-completed adjustment of the real estate market.
Much like Ireland, Spain is not expected to seek extra financial support to reassure potentially nervous investors as it leaves its bailout behind. Spain emerged from recession in the third quarter and is expected to achieve a growth rate of at least 0.5% in 2014.