Spain to make $1.8B early payment on European aid package of $55B loaned to prop up banks

MADRID – Spain will start paying back early part of the 41 billion-euro ($55 billion) aid package it received from the European Union in 2012 to prop up ailing banks and prevent the nation from descending into financial chaos, Deputy Prime Minister Soraya Saenz de Santamaria said Friday.

Spain will pay back 1.3 billion euros ($1.8 billion) soon, even though payments were not due on the rescue funding until 2022, she said.

Spain’s banks were hit hard with bad loans and saddled with property after a prolonged real estate boom burst. Amid intense international fears that the country’s financial system could collapse, the EU approved the aid package.

Saenz de Santamaria said the government also approved an economic stimulus package with 40 measures that it hopes will generate economic stimulus of 11 billion euros ($15 billion).

The approved measures reduce what banks collect from credit and debit card purchases in a bid to help small and medium size businesses, provide new incentives for vehicle purchases and increase credit lines for small and medium size businesses.

Prime Minister Mariano Rajoy said last weekend that Spain will lower its corporate tax rate from 30 per cent to 25 per cent but Saenz de Santamaria did not mention that plan or give guidance on when the tax break would be approved.