MADRID (AP) â¿¿ Spain has succeeded in stabilizing a banking system that almost collapsed last year and is well-positioned for better economic times going forward, European Central Bank President Mario Draghi said Tuesday.
Draghi delivered the upbeat assessment to Spanish politicians behind closed doors in Parliament, later telling reporters that "Spain is on the right track."
The country has had to make a host of painful austerity measures and received a bailout package for its banks funded by the eurozone. In exchange for the loans, Spain has been merging, shutting, or nationalizing its weaker banks and requiring them to hold larger capital buffers."Today Spanish banks are properly capitalized by and large, so in a position to give credit," Draghi said. The ECB itself has been instrumental in taming Spain's financial crisis. In August it announced a program to buy the government bonds of countries in need to bring down their borrowing rates. The move scared investors away from betting on Spain's financial collapse â¿¿ since the summer, Spain's borrowing rates have dropped sharply and the stock markets rallied. The economy remains in recession, however, and a recovery is expected to be slow at best. Though many Spanish individuals and businesses say they are still unable to get loans except to buy property that the banks want to unload from their balance sheets, Draghi said "borrowers who have no debt or little debt are actually able to get credit." He suggested that borrowers who have existing debt may see their ability to get credit improve toward the end of this year as the 17-nation zone that uses the common euro currency experiences a slow and modest economic recovery. "We will see credit flows picking up at that time as well," Draghi said. Draghi praised Spain for passing labor laws making it cheaper for companies to hire and fire workers while acknowledging that the nation is going through deep economic pain with 26 percent unemployment and a much higher rate for adults under age 25. Spain also hiked taxes and made deep cuts to cherished education and national health care.