Spain will be forced to comply with 32 conditions laid down by the EU if it wants to get its hands on the 100,000-million-euro bank bailout.
IVA will have to go up and tax relief on first homes will be scrapped as part of the list.
The ministry of the economy will have to hand over much of its jurisdiction to the Bank of Spain, particularly in terms of the power to sanction financial institutions and granting licences for them to trade.
Internal audits within the Bank of Spain will be carried out, and the Central European Bank (BCE) will supervise its activities.
The Ordered Bank Restructuring Fund (FROB) will have greater powers, and the government must force banks which are sinking to wind up.
Those which require public funding to stay afloat must hand over their affairs to a liquidation company, cut down branch numbers and slash jobs, sell off investments and shares in industry and limit bank managers’ salaries.
Banks which have received State help will be obliged to float on the stockmarket, and savings banks – effectively, building societies – will no longer be able to manage their own commercial banking activities.
Holders of preferential shares and other ‘hybrid’ investments will be expected to bear a percentage of the loss when a bank needs public funds to be able to continue.
Overall, Spain’s banking sector will be closely supervised by the European Commission (EC), the BCE and the European Banking Authority – the latter taking the place of the IMF – and will regularly audit those institutions which have received bailout funds to ensure they comply with the rules.
This will involve their having to supply weekly data on their liquidity and cash held in deposit in client accounts.
Taxpayers will be directly affected by a rise in IVA – the exact percentage of which has not been confirmed – the elimination of tax breaks on first residences, labour reforms, a rise in State retirement age, and a ‘taxation system which aims at fiscal consolidation’, as yet undefined.
Spain’s State deficit will have to come down from its present 8.9 per cent of its GNP to 6.3 per cent by the end of 2012, then to 4.5 per cent after 2013 and 2.8 per cent by 2014.
The banks for which the bailout fund is destined will include, among others, Bankia, CatalunyaCaixa, NovaCaixaGalicia and Banco de Valencia, being the four most pressing cases.
Article source: ThinkSpain.com