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Having hit rock bottom in 2012, Spain’s banks are now a force for good for Spain’s economy, experts say.

With credit flowing more freely through Spain’s economy this summer than it has done for many months, the country’s banking system is enjoying a rather tranquil time of it, says the Financial Times (FT), as consumer confidence picks up, the property market goes from strength to strength, and job creation booms…

Compared to Italy, which has continuously struggled to yank itself free from the spectre of another recession, Spain’s economic turnaround in the space of just three short years is remarkable, the newspaper has said this week.

Talk of bailouts has subsided, bad loan ratios have fallen, mortgage lending is up and the latest banking stress tests conducted in Spain proved notable in the lack of concern, worry or drama generated by the industry. In short: Spain is doing rather well, thank you very much, and its bankers, having suffered (some might say justifiably) years of stress and belt-tightening, are enjoying something of a tranquil summer.

Having turned to the EU for a €100 billion bailout as recently as 2012, the turnaround in Spain’s banking sector, much like in its property industry, has been impressive. Underperforming branches were closed, staff were either laid off or retrained to become more efficient, and the sector has generally conducted a much-needed improvement.

According to the FT, during the housing boom of 2004-2008, Spain became the most over-banked nation on earth, with a branch for every 1,000 inhabitants. Since the crash, however, the number of banks in Spain has fallen from 46,221 to slightly more than 30,000.

That is more than a 30% reduction in bank branches; a trend that, in many other countries, would be met with outcry. But for Spain, such pruning of the branches was necessary. And since undergoing the reform, Spanish banks are once again a welcome boost – rather than a profit-driven hindrance – to the country’s economy, as credit now flows more easily again for households and small businesses.

“You cannot have a functioning economy without credit flowing properly,” Ángel Talavera, eurozone analyst at Oxford Economics, told the FT. “That was the case during the recent economic crisis, but now we see the banking system being supportive of the recovery. The level of new loans is growing strongly. That is something we haven’t seen for years.”

The head of the Spanish Banking Association, José María Roldán, made a similar assertion, stating: “Our banks are now in a position to finance the economy recovery process without any problem. From being a drag on the economy, because they had to clean up their balance sheets, banks have become a positive factor.”

Data from BBVA’s latest Banking Outlook showed that lending to Spanish households in April this year was 21% higher than the same month in 2015, with favourable terms being offered to those in search of small loans or a mortgage.

The sector’s recovery from such a bad position means that Spain’s banks are now some of the most efficient in Europe. “In Spain you had a property bubble that caused big problems in the construction and real estate sector, but that was very concentrated,” BBVA analyst Santiago Fernández de Lis said. Now, he added, those problems have all but disappeared.