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Rajoy’s People Party has pushed ahead with the harshest austerity measures in the country’s democratic history to tame surging borrowing costs that last year pushed Spain to the verge of a bailout. While seizing homes may soften the impact, it threatens to complicate the government’s task of meeting the terms of a €41 billion rescue package for the banking sector, including selling €50.8 billion of soured property assets transferred to the nation’s bad bank with a return for its investors.
Spain’s Economy Minister Luis de Guindos said the regions’ actions will choke off mortgage lending and the chairman of Spain’s largest bank described it as a “terrible” idea. De Guindos said that the only result of expropriating homes is that banks will no longer grant mortgages on properties in Andalusia, located in the south of Spain and comprising eight provinces including Granada and Malaga. He said that the central government already passed a law last year freezing bank repossessions for a two-year period in the case of low-income families, a measure that “solves problems without creating additional ones".