Eurozone finance ministers approved Spain’s bank bailout on Friday but it comes at a price.
The countries that are lending the money have forced Madrid to abide by strict conditions in return for the funds.
Spanish officials are not happy about that as they have been doing everything possible to ensure the country’s national sovereignty is not weakened.
As well as honouring its government deficit reduction targets and commitments on structural reforms, Madrid will have to accept closer outside scrutiny of Spanish banks by handing over its banking supervision powers.
The banks that get bailout money will have to open their doors to the European Commission the European Central Bank and the European Banking Authority.
To ensure there is no political meddling, the economy minister will have to relinquish some of his powers to the central bank – the Bank of Spain – such as the licensing and sanctioning of lenders.
A big reason the banks are in trouble is that as the property bubble inflated they loaned billions that are not going to be repaid.
Those loans will all go into a newly created so-called bad bank and be written off.
Even with this money, Spain’s banks will continue to struggle in a moribund economy. A government forecast released on Friday said that GDP will shrink by 0.5 percent next year.
It is predicted to grow by 1.2 percent in 2014 and by 1.9 percent in 2015.
Public debt is seen as falling to 4.5 percent of GDP next year, 2.8 percent of GDP in 2014 and 1.9 percent in 2015.
Unemployment is set to be 24.6 percent this year, easing only slightly in 2013 to 24.3 percent of the workforce and still at 23.3 percent in 2014.