Europe banks face major losses: IMF

The International Monetary Fund (IMF) says banks in three European countries, already grappling with economic woes, are at risk of substantial losses.

In a report released on Wednesday, the IMF said that several banks in Spain, Italy and Portugal face some 250 billion euros (USD 338 billion) in potential losses on their loans in the following years.

œSome banks in the stressed economies might need to further increase provisioning to address the potential deterioration of asset quality on their corporate loan books, which could absorb a large portion of future bank profits,” it said.

Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008.

Spain must lower its deficit to 4.5 percent in 2013 and 2.8 percent in 2014. Many economists, however, say those targets will be difficult to meet amid poor prospects for Spain™s economic recovery.

Moreover, Italy started to experience recession after its economy contracted by 0.2 percent in the third quarter of 2011 and by 0.7 percent in the fourth quarter of the same year.

Over the past decade, Italy has been the slowest growing economy in the eurozone as tough austerity measures, spending cuts, and pension changes have stirred serious concerns for many people already grappling with the European country™s ailing economy.

Also, Portugal is struggling with record unemployment and rising social discontent.

Portugal is expected to bring its deficit below 3.0 percent of its gross domestic product (GDP) until 2015.

The so-called troika of international lenders including the European Union (EU), the European Central Bank (ECB), and the International Monetary Fund (IMF) granted Portugal an emergency loan worth 78 billion euros (102 billion US dollars) after the country˜s borrowing costs soared to unsustainable levels in 2011.

In return, the Portuguese government imposed a series of deeply unpopular austerity measures to meet the conditions of the international bailout of its economy.

MAM/MAM

Copyright: Press TV