Borrowing by Spanish banks from the European Central Bank stood at a record in February at a net €152.4 billion, data from the Spanish national bank showed today.
The figure was boosted by massive ECB loans to euro zone banks on February 29 and is a sign of the trouble Spanish banks continue to have in obtaining funds on interbank lending markets.
Borrowing from the ECB by Spanish banks in January had already hit a record €133.2 billion, the figures showed, and have been on an upward trend since September.
The ECB has carried out two-long term refinancing operations since December that provided about €1 trillion to commercial banks at ultra-low interest rates. The first LTRO drew more than 500 euro zone banks, and resulted in loans of €489 billion while the second saw 800 banks borrow €530 billion.
The operations were aimed at easing interbank lending conditions so that ECB monetary policy is transmitted smoothly to the wider economy.
Spanish banks have found it hard to borrow money from euro zone peers because many in Spain are heavily exposed to the property sector, which has been in a slump since a bubble burst in 2008.
As part of wide-reaching fiscal reforms, the Spanish government has told banks to build up cash reserves to a total €52 billion as a precaution against possible losses in their property portfolios.
New Spanish deficit target 'reasonable' - Rajoy
Spain's new 2012 deficit target of 5.3% of output agreed with the European Union is "reasonable and achievable", Prime Minister Mariano Rajoy said today.
Rajoy said Madrid would "scrupulously" respect its 2013 deficit target of 3% agreed with Brussels. Spain was supposed to bring its deficit down to 4.4% of output this year, but last month Rajoy month said that Madrid would aim for a deficit of 5.8% instead.
The higher figure arose due to a sharp increase in the estimated deficit for last year, setting a higher base level, but the European Commission responded by insisting at the time that Spain must meet its targets.
On Monday, the two sides agreed that Spain must cut the deficit to 5.3% of gross domestic product in 2012 and to the EU ceiling of 3% in 2013 - still a major challenge for the next two years.
"What is important is that we have accepted changing the previous goal of 4.4% set in 2009 and ratified in 2011 for a more reasonable and achievable target of 5.3%," he said during a debate in parliament.
"Since we must always maintain the maximum level of cordination and consensus with our European partners, we decided to accept this approach. The solidity of our arguments was recognised even if we are asked to make a stronger effort this year," he added.
Rajoy's government, in power since just December, had argued that the 2012 deficit target set by its Socialist predecessors needed to be changed to reflect new economic realities, with Spain now forecast to return to recession this year with a contraction of 1.7%. The new deficit targets oblige Spain to make an extra €5 billion of savings this year.
Rajoy's conservative government said shortly after it came to power in December that the 2011 public deficit would be about 8% of GDP, far above the 6% agreed with Brussels by Spain's previous socialist government.
It has announced spending cuts of €8.9 billion and frozen public sector wages and increased taxes on income, savings and property to bring in €6.3 billion, as part of efforts to rein in the deficit.
Rajoy has already vowed to implement further measures to cur the deficit as his government races to make sure the country does not get dragged into the debt crisis which has already forced Greece, Ireland and Portugal to seek financial bail-outs.
Spain is to present its 2012 budget by the end of March. It is currently operating on an extension of the 2011 budget.
"All levels of government must make an effort in this direction but we have decided that the additional adjustment of 0.5 percentage points required in 2012 will be assumed entirely by the central government," the Prime Minister said.
Spain's central government deficit widened in January to €9.04 billion from €7.71 billion during the same time a year ago due to lower tax revenues, the finance ministry said earlier this week.
