The Banco de España has released its Financial Stability Report, scrutinizing the Spanish government's banking tax, a measure initially introduced in the autumn of 2022. Under the approval of governor José Luis Escriv, the report highlights several drawbacks associated with the tax, echoing criticisms previously articulated by the European Central Bank (ECB).

The document states, "The Banco de España shares the conclusions and recommendations of the ECB's opinion."

This stance marks a significant shift from the government’s previous dismissal of the ECB’s concerns.

In November 2022, Escriv had publicly questioned the validity of the ECB's report, asserting it was irrelevant and a mere repetition of past assessments.

He stated, "They must have it copied and pasted from other moments, in different contexts...

I do not understand that the ECB wants to interfere in the legitimacy of a government to regulate these issues."

In a concurrent reaction, Prime Minister Pedro Sánchez redirected criticism towards Luis de Guindos, the then-Vice President of the ECB, suggesting that he had ulterior motivations based on his past as Spain's Minister of Economy and his role in the banking sector.

Sánchez stated, "I appreciate the concerns from Mr. De Guindos with this opinion."

However, recent confirmations indicate that Sánchez had been informed by his former Vice President, Nadia Calviño, about the ECB's directive that was independent of any singular individual’s influence.

Reports disclose that Calviño, during a visit to the ECB with King Felipe VI in October 2022, had engaged in a private meeting with ECB President Christine Lagarde and other officials, who signaled a critical view of the tax that would bolster legal arguments from affected banks against the Spanish government.

The ECB’s opinion was released shortly after the November announcement of the banking tax, and Sánchez's public criticism of De Guindos appeared strategically aimed at deflecting blame from broader, institutional disapproval.

The ECB emphasized the potential negative implications of such a tax on the banking sector's lending capabilities and the integrity of the European banking market.

Further complicating matters, the European Commission has expressed disapproval of the Spanish government's recent attempts to hinder BBVA's takeover of Banco Sabadell.

This decision, sanctioned by the National Commission on Markets and Competition and the ECB, has been criticized for its inconsistency with the principles aimed at achieving a unified banking sector within the Eurozone.

The Spanish government advocates a banking union while simultaneously imposing limitations on market activities, such as mergers.

In the case of Banco Sabadell, stopping the merger is perceived as essential for maintaining support from various Catalan partners within the ruling PSOE party.

The European Commission's resistance to this intervention underscores concerns about the government’s commitment to fostering a competitive banking landscape.

Amid these developments, the Spanish government’s narrative remains complicated, as the internal and external pressures continue to evolve.