An aggressive approach to tackling its banking-system troubles set Spain apart from its Mediterranean neighbors such as Italy
The 2012 European bailout of the Spanish banks was probably the nadir of the Spanish financial and economic crisis. The reforms that followed, supported by the IMF and the European Union, although painful, planted the seeds for the recovery, economists say.
“I think [bank reform] was one of the main successes of the Spanish economy. It was difficult, but Spain was at a point where the financial system was almost on the brink,” says Angel Talavera of Oxford Economics. “The fact that they actually asked for international assistance and recapitalized the banks, creating a ‘bad bank,’ I think was important for the economy. [It] set the start of the recovery.”
An aggressive approach to tackling its banking-system troubles sets Spain apart from Mediterranean neighbors such as Italy, some say. “Spain has had a program with the IMF that involves cleaning up the banking sector. That was good. It has been one of the key reasons why Spain has been growing stronger than Italy,” says Angel Ubide, of Goldman Sachs. “When growth improved, Spain had a solid banking sector that would help the recovery. Italy didn’t do that at the time; Italy managed to escape having a program. Italy has lingered for several years with these festering issues on the banking sector that have probably been a detriment.”
An exception is Banco Popular, which was declared insolvent in 2017 and bought by larger Santander, at the price of just one euro. Economic commentators praise the speed and the private-sector nature of the government’s approach.
“What happened with Banco Popular had almost no impact on the rest of the financial industry. This is something very positive, in that a very vicious circle that has harmed the Spanish economy in the past was broken,” says Miguel Cardoso of BBVA. “I am talking about the dependency between the solvency of the public sector and the solvency of the banking sector. We interpret all this positively, as something that is leading to the strengthening of the financial sector.”