The European Commission on Tuesday warned the southern Spanish region of Andalusia against taking “unbalanced” measures to stop evictions of mortgage defaulters from their homes, saying they could jeopardize Spain’s economic recovery.

Hundreds of thousands of Spaniards have been evicted or face eviction over unpaid mortgages in the country with a 27 per cent unemployment rate.

Prime Minister Mariano Rajoy’s government has adopted some measures to protect defaulters, such as giving the poorest defaulters more time to repay their loans, and increasing protection against abusive clauses in mortgage contracts.

But associations representing defaulters say the legislation is far from sufficient.

Andalusia adopted stronger rules which allow homes to be expropriated from banks for three years to protect the most vulnerable families from eviction. The region also established fines for banks that fail to put empty housing on the rental market.

Others among Spain’s 17 semi-autonomous regions have announced similar plans.

Simon O’Connor, a spokesman for EU Economy Commissioner Olli Rehn, warned that the Andalusian measures “could heighten uncertainty in the Spanish housing market and have the potential to discourage investors.” The measures could also pose challenges for Sareb, a bad bank created to sell off sour real estate assets that have burdened Spanish banks, O’Connor said.

“We fear that the key programme objective of restoring the viability and ensuring market access for the Spanish financial sector, for the Spanish banking sector could be delayed or impeded,” the spokesman said.

“Financial stability ... is a precondition for a broader economic recovery in Spain,” he said.

The eurozone has granted Spanish banks a bailout of about 40 billion euros (52 billion dollars) on strict conditions aimed at stabilizing the economy, which is expected to shrink by 1.5 per cent this year.

Mortgage defaulters have demonstrated massively against the evictions, accusing the government of siding with banks. Several people facing eviction have committed suicide.


Merkel rules out eurozone defections July 5, 2013