MADRID, May 11 (Xinhua) -- The Spanish government on Friday announced measures to protect the country's banks against the risks caused by loans going bad.
According to the new measures announced by vice prime minister Soraya Saenz de Santamaria and Economy Minister Luis de Guindos, Spain's banks will have to find an extra 30 billion euros (39 billion U.S. dollars) of capital.
The extra capital will have to be raised by the banks themselves or from government loans for which an interest of 10 percent will be charged.
Earlier this year, the government had obliged Spanish banks to find 54 billion euros of extra capital to shield against bad loans.
De Guindos said the decision had been taken to restore confidence and credibility in Spain's financial system. The move comes just two days after the government nationalized 45 percent of Bankia, the country's fourth biggest bank.
At the end of last month, ratings agency Standard and Poor's downgraded a majority of Spain's banks.
The government has decided to appoint two independent auditors who will have the task of valuing the real-estate portfolios of the country's banks.
De Guindos said even the slightest doubt regarding the values of accounts would make economic recovery more complicated.
In Spain, the collapse of the housing market left the country's banks with properties that declined steeply in value over the last three years. Many individuals are also having problems in meeting their mortgage payments. Banks will be forced to put some of their mortgages into separate companies, it was announced on Friday.
Spain will be liberalize regulations for property rentals in an attempt to make it easier for banks to sell their portfolios of property debt.
These decisions come the same day the European Commission warned that Spain will not meet its target of reducing the state deficit to 5.3 percent this year and to 3 percent in 2013.
The EU believes the deficit will be 6.4 percent this year and will only be reduced by 0.1 percent in 2013. Apart from recent government spending cuts, another reason for this is "the necessary adjustment of bank balance sheets," that will further reduce their willingness to gives loans thereby restricting growth.
The EU expects the Spanish economy to contract by 1.8 percent this year, extending the recession till 2013 when the economy will shrink by a further 0.3 percent.