The euro region can withstand a Greek default, Spanish Economy Minister Luis de Guindos said, as he pledged to overhaul Spain’s financial system without adding to the burden on public finances.
“It is strong enough for sure,” Guindos said in an interview today with Bloomberg Television in Davos, Switzerland. “You cannot dismiss the political importance of the euro.”
De Guindos, appointed on Dec. 22 by newly elected Prime Minister Mariano Rajoy, is charged with steering a shrinking economy back to growth and reducing a 23 percent jobless rate. He is also leading an overhaul of banks reeling from the sovereign debt crisis and the collapse of Spain’s property boom.
De Guindos, 52, said the Spanish government doesn’t plan to use taxpayers’ money to shore up banks. Lenders are capable of funding 50 billion euros ($66 billion) of additional provisions the government wants them to make from their earnings, he said.
“In the case of the 50 billion euros in further provisioning, this is a figure that can be absorbed by the banks through the P&L,” he said.
Provisioning efforts will be “especially dedicated” to foreclosed real-estate assets, particularly “land and other kind of property,” he said. Lenders that the government thinks are not viable in the medium-term will have to merge.
Spanish lenders have piled up foreclosed land, unfinished developments and homes onto their books since the collapse of the property boom in 2008. While the Bank of Spain doesn’t publish data on how much real-estate banks hold, it estimates that total “troubled” assets linked to the industry amount to 176 billion euros, a figure that includes loans and property. Provisions already cover about a third of that, according to the Bank of Spain.