Spain gave investors a huge boost this week by doubling the guaranteed minimum of 50,000 Euros per deposit, as required by the European Union.

It will come as a relief to everyone with savings here in Tenerife – and the whole of Spain – in view of the “credit crunch” horrors of the past few weeks.

Alongside this good news, the Central Government announced a 30,000-billion-euro fund from the Treasury to “support the funding of the credit system”, describing it as a “great temporary loan” to uphold the trust of citizens.

Prime Minister José Luis Rodríguez Zapatero announced last week that the minimum guarantee on deposits would rise from the current 20,000 Euros to 100,000 Euros per head.

“If there is any site where the savings are completely safe, it is in Spanish financial institutions,” he told the media at the Palacio de la Moncloa.

The decision to raise the Deposit Guarantee Fund (FGD) was taken after the finance ministers of the European Union (EU) agreed, raising to 50,000 Euros the minimum amount insured in case of a bankrupt bank.

Thus, all the member states have agreed to ensure a minimum of 50,000 Euros, for at least a year, on deposits from individuals.

Zapatero stressed that although several countries increased the guaranteed amount, sometimes up to 100%, the Government did not have “the same urgency” and felt that Europe should act “in a coordinated manner” to ensure the stability of the financial system.

As for the Spanish banks, Zapatero insisted that “even in a context as complicated as the current situation”, they have proven their reliability and robustness.

He added that “fortunately”, the government has not had to intervene to rescue a financial institution, while he also felt there was no need to affirm the soundness of our credit system, because the facts are stronger that the words”.

He explained that there was no system of regulation, supervision and management “as demanding” as the Bank of Spain and praised the work of the Supervisor who, he said, had led the financial system to a “better state than the vast majority”. But he warned that it was not free of difficulties, such as access to credit.

Also, Zapatero announced the establishment of a Treasury fund of 30,000 million Euros, expandable up to 50,000, to buy asset quality of financial institutions and thus facilitate the credit to businesses and citizens. He said it was an “extraordinary measure”.

The Prime Minister added: “This is a great temporary loan and we can do it because we have debt at very reasonable levels.” He also indicated that this decision would not increase the deficit, which would be borne by the Treasury.

Zapatero made it clear that the Treasury would only assume “assets of the highest quality” and no “toxic”. The goal, he said, was not to solve the problem of solvency of the financial institutions, but to facilitate the financing of businesses and citizens, promoting the smooth functioning of the market.
He met with Spanish banks, and also the head of the CEOE and the secretaries general of the UGT and CCOO unions.

The Governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, appealed for calm to ensure that “at this moment, there is nothing that puts at risk the savings of Spanish depositors”. He said the national financial system was “well-managed, regulated and supervised”.

During his Congress appearance, he said there was no need to raise the maximum guarantee for savers because they had a “huge” trust that in the event of financial collapse, they would recover all their money.

Source: Canarian Weekly