European banks received 1.6 billion public euros between 2008 and 2010

European banks received 1.6 billion public euros between 2008 and 2010

  • Joaquín Almunia, head of Competition, warns that the problems will not be solved until the sovereign debt crisis is overcome.
  • Most of the aid went to banks in three countries: Ireland (25%), United Kingdom (18%) and Germany (15%).
  • The keys to the debt crisis
Banco de España

Image of the headquarters of the Bank of Spain, in Madrid. JORGE PARIS

The banking sector received a total of public aid of 1.6 trillion euros between October 2008 and December 2010 from the countries of the European Union (EU), representing 13% of the European Gross Domestic Product (GDP) , according to data published Thursday by the European Commission (EC).

On the other hand, public support for the real economy fell by 11,700 million last year, which represents a decrease of almost 50% compared to 2009. This decrease is due, according to the EU Executive, to the low demand and budget constraints approved in most EU countries.

The governments gave 82,900 million to the productive sector Of the 1.6 trillion given to the banking sector, almost 1.2 trillion -that is, 10% of the GDP- was destined to state guarantees to the financing of the entities and other support measures to liquidity, according to the EC. In addition, financial institutions received just over 400,000 million euros in recapitalization and asset treatment measures to improve their solvency. 58% of this aid was given to banks in three countries: Ireland (25%), United Kingdom (18%) and Germany (15%).

In addition, European governments put 82,900 million euros available to temporary companies in the productive sector , although in 2009 21,000 million were used and in 2010, 11,700 million. The aid to industry and services was 61,000 million euros, or 0.5% of GDP, of which 85% went to objectives of common interest.

When will it end?

The EU Member States also guaranteed subsidies of up to half a million euros per company, although these temporary measures were partially abandoned last year and replaced by guarantees, reduced interest, risk capital assistance or investments in the environment.

The usual aid , that is, that was not introduced as a result of the crisis, remained in 2010 at levels similar to those of previous years, specifically in 73,800 million euros – 0.3% of EU GDP. Also, the EC said that in 2010 the public administrations recovered 82% of the 12,000 million delivered in subsidies considered illegal by the European authorities.

The rules to help banks will be extended on January 1. That is why the Commission proposed on Thursday to extend the duration of the temporary framework of aid to the financial sector but to end the aid framework for the productive sectors. As of January 1, the rules for the delivery of aid to banks will also be binding, which the EU will extend in the coming days.

“The key condition for disconnecting the assisted breathing machine between the State and the financial sector is that the sovereign debt crisis be solved,” the vice president of the Commission in charge of Competition, Joaquín Almunia, said in a statement. The EC vice-president indicated that he will annul the current rules of banking assistance “as soon as market conditions allow”, and that he will ensure that “the aid received by the banks and by the real economy is destined to create growth and job”.

No to joint endorsements

The European Union has ruled out this Thursday to grant joint guarantees to European banks to facilitate their refinancing in the markets through the issuance of debt, given the resistance of several countries and the possibility that they can resort to the European Financial Stability Fund ( FEEF). Spain, Italy, Cyprus and France were in favor of the limited mutualisation of guarantees to banks, but Sweden, Germany, the United Kingdom, the Netherlands and Austria refused and Denmark and Luxembourg expressed their reservations.

German Finance Minister Wolfgang Schäuble said that the European Banking Authority (ABE) will publish the final figures for the recapitalization needs by the beginning of next week so that the systemic banking meets the 9% maximum capital quality before June 2012.