Spain avoided full rescue thanks to bank bailout

Spain's economy minister on Sunday said the eurozone's fourth-largest economy last year narrowly escaped a full state rescue thanks to an EU bailout of its ailing banking sector. "The perception of reality was far worse than reality itself. The financial aid helped put all the cards on the table," Luis de Guindos said in an interview published in leading centre-left newspaper El Pais, referring to the bank stress tests that were then carried out. "If Spain had not asked for financial aid, it would have ended up being rescued." The rescue plan agreed in July 2012 offered up to 100 billion euros ($130 billion) to save Spain's financial sector from collapsing under the bad loans left over from a housing bubble that burst in 2008. The Spanish banks have so far taken 41.3 billion euros. Spain plunged into recession in 2011 and market concerns about the country's financial stability last year saw its financing costs soar. In the interview, de Guindos said that Spain does not envisage asking for more funds. "A new contract would have to be negotiated and the question does not arise because the doubts have been lifted." The minister reiterated that the Spanish economy will shortly exit from recession. "The recession is over. The question now concerns the strength of the recovery," he said. Spain's economy shrank by 0.5 percent on a quarterly basis in the first three months of 2013. The government is predicting a 1.3-percent economic decline this year and a slow recovery in 2014. The International Monetary Fund forecasts a sharper contraction of 1.6 percent for Spain and the European Commission forecasts a 1.5 percent fall.