28.7.2012 Official Journal of the European Union L 202/17 DECISIONS COUNCIL DECISION of 23 July 2012 addressed to Spain on specific measures to reinforce financial stability (2012/443[EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 136(1)(b), in conjunction with Article 126(6) thereof, Having regard to the proposal from the European Commission, Whereas: Article 136(1)(b) of the Treaty on the Functioning of the European Union (TFEU) foresees the possibility of setting out economic policy guidelines specific to the Member States whose currency is the euro. In the Recommendation on the National Reform Programme 2012 of Spain and delivering an opinion on the Stability Programme for Spain, 2012-2015 (), the Council recommended that Spain take action to ‘implement the reform of the financial sector, in particular complement the on-going restructuring of the banking sector by addressing the situation of remaining weak institutions, put forward a comprehensive strategy to deal effectively with the legacy assets on the banks’ balance sheets, and define a clear stance on the funding and use of backstop facilities’. Abundant availability of external financing at low cost in the 2000s fuelled a credit-driven domestic demand and asset boom in Spain, concentrated in particular in the real estate sector. The burst of the real estate and construction bubble and the economic recession that followed have adversely affected the Spanish banking sector. As a result, with the exception of a few large and internationally diversified credit institutions, Spanish banks have largely lost access to wholesale () O] C 219, 24.7.2012, p. 81. () funding markets on affordable terms and, thus, have become highly dependent on Eurosystem refinancing. In addition, their borrowing capacity has been severely limited by the impact of rating downgrades on collateral availability. The sizeable contraction of the economy in recent years, which is affecting employment and unemployment in a very negative way, has deteriorated substantially the budgetary position in Spain. According to a Commission services update of the 2012 spring forecast, the general government deficit is projected at 6,3 % of GDP in 2012, which compares to an expected deficit of 5,3 % of GDP in the 2012 stability programme and the draft 2012 budget law. Gross public debt rose to 68,5 % of GDP in 2011, and according to the Commission services update of the 2012 spring forecast it is expected to surge to 80,9 % of GDP in 2012 and to 86,8% in 2013, based on a no-policy-change scenario, thus exceeding the Treaty reference value in all years. Risks related to the macroeconomic scenario and the budgetary targets, as well as to additional financial rescue measures, may contribute to a further increase in public debt. In view of these developments, on 10 July 2012 the Council issued a recommendation to Spain under the excessive deficit procedure (EDP) to put an end to the present excessive deficit situation by 2014. The Spanish authorities have taken a number of important measures to address the problems in the banking sector. These measures include the clean-up of banks’ balance sheets, increasing minimum capital requirements, restructuring of the savings bank sector, and significantly increasing the provisioning requirements for loans related to Real Estate Development (RED) and foreclosed assets. These measures, however, have not been sufficient to alleviate market pressure. In February 2011, the Spanish authorities raised the minimum capital ratio requirement (‘capital principal) to 8 % of banks' risk weighted assets and gave banks until September 2011 to comply with this new regu- lation. For banks more dependent on wholesale funding and characterised by a limited market access the