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Troika asks for the consequences of the Catalan crisis for the economy

European technicians visit Spain to analyze the state of banking

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Troika asks for the consequences of the Catalan crisis for the economy

A delegation of technicians from European Commission visited Madrid this week to prepare recommendations for reforms made every year. And previous week was in Spain a troika team, composed of ECB, Commission and European Rescue Mechanism (ESM). This was intended to keep track of banking and economics after financial rescue program.

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Spain will reimburse ESM anor 2 billion of 41,300 borrowed, so y still subtract to return some 31.7 billion. Although focus of meetings with ministries and independent agencies was not in principle Catalonia, re were several questions about political tensions and how y could end up affecting activity and banking, according to several sources consulted.

The most frequent reply from government representatives was that it is difficult to calibrate for time being. Airef has encrypted impact by up to 12 billion less in GDP growth. The Ministry of Economy has calculated losses of some 3 billion in its forecasts sent to Brussels. And Bank of Spain has warned of risk of damaging investment and consumption if conflict is prolonged. But any estimation at this point is still somewhat hasty, insist. And executive expects that situation can soon be releaded with minimal damage

"These meetings have been more of a second level and covered many areas." But it is inevitable that he is asking a lot about Catalonia by focusing all news, says a source that has attended meetings.

The Commission's economists put emphasis on reforms to increase productivity, fatten size of businesses, and promote R D. They also demanded measures to facilitate relocation of workers and improve labour market. It is a question of reinforcing quality of growth, beyond need for Government to present a budget that will ensure compliance with deficit objectives required by Brussels. As country advanced, Commission has sent a letter to Spain pointing out importance of a budget plan.

The troika called for specific measures to clean up Sareb bad bank and to reinforce profitability of banks in a difficult context by low interest rates.

At strictly economic level, European executive emphasizes that Spain must "continue with reform efforts to achieve greater productivity and ensure inclusive and sustainable growth".

"This means measures to furr reduce unemployment, make labour market more inclusive and improve business environment, while continuing to strengn financial sector." In addition, policymakers should seize opportunity of economic recovery to continue fiscal consolidation in order to ensure a decisive reduction in public deficit and debt ratios and rebuild fiscal space that allows To Spain to overcome any adverse disturbance, "underlines a note published by Commission on its visit to Madrid.


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