MADRID (Reuters) — Europe needs to press ahead with labour and public pensions reforms and restore confidence in its banks if it wants to translate a fragile recovery into jobs, Spain's economy minister said on Thursday.
In an interview with Reuters, Luis de Guindos also said that Spanish banks would all pass a Europe-wide stress test later this year and that the state would soon start selling down its stake in the country's biggest rescued lender, Bankia, although it will retain a majority holding for some time.
Spain, which came close to requesting a bailout at the end of 2012 after it sought 42 billion euros in European funds to prop up its financial system, is enjoying the first signs of a tentative recovery after a five-year economic slump.
Although close to six million Spaniards — or more than one in four — are out of work, Spain is bearing the fruits of two years of economic reforms that include a public salaries freeze and new labour and pension laws.
The focus is now turning to Italy and France, which came under less financial pressure during the euro zone debt crisis and fell behind peers in reforming their economies.
"We have a recovery that is weak and fragile, that is uneven," de Guindos said, adding that Europe was more productive than the United States or Asia but less flexible. This had to change.
"We have to strengthen this growth and we have to translate it into jobs. And this requires structural reforms. At a European level, we need to review labour laws. The lack of labour flexibility is making more difficult to generatejobs."
Decisive steps should also be taken to reform the public pensions system, bolster internal mobility within the European Union, and recapitalise once and for all the continent's weakest lenders, he said.
De Guindos said Spain had done its homework over the last two years to fix the balance sheet of its lenders, nationalizing some and forcing others to raise money on the market.
"There will be no step back for Spanish banks as part of the ongoing assets quality review and stress tests," he said.
Building on strong investors' interest for Spanish assets, the government is taking steps to start selling part of its 68 per cent stake in Bankia, a milestone in the recovery from financial crisis of both the bank and its home country.
"There could be during the year small stake sales, before a bigger sale in the medium-term," de Guindos said.
"The state will maintain the control, the majority in Bankia over the next quarters. We know the value of this controlling stake," he added.
Spain's bank restructuring fund is about to hire advisers for the sale, which could happen over the next few weeks.
Under Bankia's Europe-agreed restructuring plan, the Spanish government has until 2017 to sell the stake and try to recoup part of the 22 billion euros it injected in the lender.
Bankia shares are up about 20 per cent in 2014 and now trade above the price at which the state recapitalized the lender, meaning it would make a small profit on the sale. The bank has a market capitalisation of 15.5 billion euros.
Beyond Bankia, the government is also eyeing selling other nationalized lender Catalunya Banc, a former savings bank based in the northeastern region of Catalonia.
De Guindos said he hoped to complete the sale by the summer.
"We have received national and international interest. This includes funds and banks," he said.