Eurostat 12 June 2012
Information note on the impact of the Spanish bank rescue package on Spanish government deficit and debt
The Spanish government is set to borrow from the EFSF or the ESM with the purpose of recapitalising parts of its banking sector. There are two parts to this operation to be recorded: the loan to the Spanish authorities, and the recapitalisation of the banks.
According to the information available to Eurostat, the operation will be technically channelled via the FROB (Fondo de Reestructuración Ordenada Bancaria), which, in statistics, is classified in the Spanish government sector.
The impact of the loan
The loan taken by the Spanish government will directly increase the Spanish government debt. There will also be a direct deficit impact for Spain for the interest expenditure on the loan. Neither the amounts, nor the conditions, are however known at this stage.
The impact of the recapitalisation
It is today too early to give a precise answer about the impact on the Spanish government deficit of the recapitalisation of the banking sector, which according to the information available will take the form of capital injections. As a general rule, the deficit impact depends on whether or not the capital injections are considered as government expenditure. A capital injection will be considered as a financial transaction, with no impact on government deficit, when the government is acting in the same manner as a private investor, by seeking a market rate of return. A capital injection is considered as government expenditure, with an impact on the government deficit, when it is de-facto covering the losses of a bank.
As for any other Member State Eurostat will analyse, with the Spanish statistical authorities, the recapitalisations on a case by case basis as soon as the details are known.
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Font: Eurostat via @ifresnillo