MARIA BARTIROMO: When we spoke last in New York, you were able to put calm in the markets. Of course, in the last couple of weeks, we've seen once again worries and speculation over the debt crisis as a result of Ireland and the impact on Spain. Characterize where we are in the economy here in Spain.
Prime Minister JOSE LUIS RODRIGUEZ ZAPATERO: (Through translator) Well, today I've even got more arguments that I can use to really put calm back in the markets, because it's all about what's happened because of the prices in Ireland because two months, just two months ago we launched a series of major reforms. We've implemented that. Our plan to reduce our deficit is being stringently kept to. We actually managed to reform the financial institutions, opening up the cajas--the number of cajas, or savings and loan banks, from 41 to 17 very quickly, reforming the way they operate to let private capital into them. We also look today at new announcements of reduced tax floor corporations, privatizations. So all of these are actions that are designed to generate trust, generate growth. They are for financial stability, and that stability and security is guaranteed there by Spain even though we've had that aftershock that we suffered because of the Irish crisis.
BARTIROMO: You are looking at new measures to make the economy more competitive. You have announced privatizations, and you said that the regional savings and loans, the cajas, the activity in terms of consolidation, will continue. Can you categorically say that the banking system in Spain is healthy and well-capitalized?
Prime Minister ZAPATERO: (Through translator) Definitely. It's not only healthy and well-capitalized, it’s done its homework, it's still doing its homework; and, on top of that, it will be one of the most attractive financial systems for investment. It will be one of the most efficient and one of the more profitable systems. We were two or three years back, and we still have
that core strength and that ability to reform as we have to reform. And therefore, all investors need to feel reassured about that. Our system has guarantees behind it, the ability to carry out the right reforms. It has modern legislation as a framework and strength that will allow us to get to Basel III in a reasonable period of time.
BARTIROMO: When would you expect growth once again?
Prime Minister ZAPATERO: (Through translator) Well, for three quarters now, the last three quarters in Spain, the economy has been giving us some positive signs. We've had two with slight positive growth figures, two quarters in a row. And the last quarter--the last quarter recorded zero growth. In 2011, the economy of Spain will grow quite clearly. In fact, there are some reports, analysts reports from the IMF, I read one yesterday from JPMorgan, too, those reports are saying that with the implementation of the reforms that are under way now in Spain, 2011, 2012 will be years when Spain will become one of the most attractive countries for investment in the securities market. The IMF said that Spain is--could be one of the countries recording most growth, the highest growth rates in 2012 or 2013 in the whole of the European Union. And I'm absolutely convinced about that. Why I'm convinced of that is because we are undertaking a whole suite of reforms that very few countries have undertaken. It's so intensely--in such a short period of time and in the right direction. These aren't just empty words. These are facts. We've got the reform of the financial system and then you go right across to the deficit reform and the labor market reform. There's the array of reforms. They're there, and you can see them, and they will actually come up with positive results for us. The long-term view investor has to be able to see whether a country is working for the long term, and that is exactly what we are doing.
BARTIROMO: I would like to ask you more about the cajas, the regional savings and loans. From what I understand, it is the real estate on the books of these savings and loans. If you had to write down those assets, what would it be? Would it be $60 billion, $50 billion? There's a lot of talk about what the value is; and, of course, these numbers are significant.
Prime Minister ZAPATERO: (Through translator) Yes. Those figures, though, really have no basis to them, those figures that they're talking about. I should remind you that Spain is, out of the European countries, the big or the medium-sized European countries, it's the country that has had to inject less capital than anybody else into its financial system. It's been barely 1 percent of its GDP. That's 11 billion euros--less than France, less than Germany, less, of course, than the UK--in order for the financial institutions here to reach the required capital amounts.
And also, I could remind you--and sometimes the analysts or some analysts don't remember this and don't perhaps underline this point enough--the regulatory system in Spain has been the most stringent, the most demanding system out of all developed countries with the rules that are actually applied by the Bank of Spain. And that has meant that the provisions, that a
requirement on every single institution, every time there's any real estate operation, that it's a 33 percent level applied. So even though the value of the land depreciates a lot more than that in values lost, those provisions are already there, they've been put in to guarantee the health, the financial health of the banks. And that is often forgotten. People overlook that fact. We have a system of requirements imposed on banks here in Spain that is perhaps the most stringent of all developed countries in the world. Therefore, we are in a position, together with a restructuring process that is under way now, to hit the criteria of Basel III, and quite reasonably, I think.
BARTIROMO: Is it fair to say, though, that housing prices are crucial to the health of the system because we are looking at perhaps millions of homes, unsold homes, a market that is very tight. We need to see buyers and sellers in order to see the property market see volume and activity again. So is it not the case that until we get clarity on house prices, whether or not they are going to continue to fall, it is hard to quantify the scale of nonperforming assets on the banks' books?
Prime Minister ZAPATERO: (Through translator) There's another feature of our country, another characteristic of Spain and its financial system, with regard to housing, which people don't often know. It's something they're not aware of, and it's a very important fact, and that is that the NPL ratio, the nonperforming loan ratio of the payment of mortgages, families who have homes in Spain, is extremely low, even with the crisis. It's not even at 2 percent. It's very, very low as a ratio.
What does that mean? It means that families, households, defend the home that they have bought. They pay off their mortgage, even in times of crisis, with a system of assurances and guarantees that are extremely robust. Consequently, when people talk about this stock, the housing stock that's still to--here to be sold, you have to bear in mind that this is a feature, as
I've just described it, of our country and our system. The housing stock, naturally enough, will start to diminish. It has already started to diminish. It will take a certain amount of time for that to happen, of course, but that will not have an impact on the health of the financial system in Spain.
BARTIROMO: Let's talk about some of the measures that you announced in terms of raising revenue and privatizing certain assets in Spain.
Prime Minister ZAPATERO: (Through translator) Yes, you're right. Today we have announced certain measures for liberalization of the economy in two very major public sectors. First of all, management of airports in the country. We will be opening up airports to private capital investment. And the body--that will be for the body that regulates and manages all Spanish
airports, the airports authority here in Spain. We're talking about a total value of about 30 billion euros for that airports authority. We will be allowing capital investment up to 49 percent in that body and the big Spanish airports, Madrid, which is Barajas Airport, and Barcelona, which is El Prat Airport, will be managed by private enterprises. This is a magnificent investment opportunity. They're both very competitive airports, high traffic volumes going through those airports, and that will certainly mobilize and draw in investment. It will also bring Spain's debt down as we are privatizing such enormous volume with that sector.