(MENAFN) Germany has agreed to provide USD1 billion financing to Spain to ease a credit crunch for small and medium-sized in the country, AP reported.
The agreement will see Germany's state-owned KfW development bank loan the money to its Spanish counterpart, the ICO to expand its lending power.
German Finance Minister Wolfgang Schaeuble said the accord aims to help small Spanish companies expand their workforces and train young people.
Spanish finance minister Luis de Guindos said that ICO will be able to provide several times the amount lent by Germany in cheap loans to smaller companies, putting the total at around USD3 billion, since the Spanish bank generally loans money over a three-year period.
Spain has been struggling for most of the past four years to afloat recession, following the collapse of its credit-fuelled real estate sector in 2008.
The government has estimated that Europe's fourth largest economy would further contract by 1.3 percent overall in 2013.
Despite a 27.2 percent unemployment rate, the highest in the European Union, and a still bloated deficit, the government says its reforms and austerity measures are paying off and recovery is in sight.
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