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Rajoy Eyes Taxpayer Funds To Shore Up Ailing Banks

by Ulrika Lomas, Tax-News.com, Brussels

10 May 2012


Marking a dramatic about-turn, Spain’s Prime Minister Mariano Rajoy has confirmed that he is no longer ruling out the idea of using taxpayers’ money to support ailing banks in Spain to avert a crisis and to restore confidence.

In a recent interview with radio station Onda Cero, Prime Minister Rajoy stated that in an extreme situation the government would fall back on the option of using public funds to rescue the financial system.

Up until now, Spain’s conservative government has consistently maintained that it would not under any circumstances resort to the use of taxpayers’ money to shore up the country’s financial institutions, currently sitting on large amounts of bad loans following the collapse of the property boom.

However, using taxpayers’ money to rescue the banking sector would be a bitter pill to swallow for a nation struggling under the strict austerity measures imposed by the government to reduce the huge budget deficit, including plans to raise income and property tax, to effectively increase corporation tax for large companies by eliminating various deductions and 'loopholes', and to raise value-added tax (VAT) in 2013.

Rajoy is to announce cabinet plans to allow banks to offload toxic risk assets on May 11.

TAGS: tax | investment | economics | fiscal policy | banking | offshore | offshore banking | Spain

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