03 february 2012, 15h30

Spain imposes real estate rules

Spain's new conservative government on Friday imposed sweeping new rules it hopes will flush out bad property loans and foreclosed property from the financial system, restore confidence in banks and set the ailing economy back on track toward recovery. The regulations approved by Economy Minister Luis de Guindos and the rest of cabinet require banks to set aside an estimated 65 billion more in provisions to cover toxic real estate assets by the end of the year. Those unable to do so can present merger plans by the end of May and get government assistance from an existing bailout fund. To avoid being forced to raise so much money for the real estate provisions, banks will face enormous pressure to sell assets like land and foreclosed or unsold homes at lower market prices. Spain rode an unprecedented building boom from the 1990s until the financial crisis hit in 2008, but the real estate bubble that burst left it with an unemployment rate of 22.8 per cent, the highest among the 17 nations using the euro.

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