If you listen carefully, you can practically hear the whole of
Germany moan. It was revealed on Tuesday that may need yet more
money if the economy continues to deteriorate.
That news came from Miguel Angel Fernandez Ordonez, the head
of the central bank, though concerns were already rising that
some Spanish banks may not survive a recession, especially if it
is made worse by the government's austerity drive.
It is a terrible time to be a Spanish leader. Following the
massive bailout(s) that Greece, Portugal and Ireland have already
been forced to take from the rest of the euro zone, Spain had to
implement austerity measures to avoid a similar fate. They really
had no choice. But, as Greece is finding out, you're damned if
you do, damned if you don't. Austerity measures will be unpopular
with the Spanish people, but deemed necessary by Europe. No
austerity measures could result in stunted aid in the future. Of
course, the main aim of the Spanish government is to avoid a
Lenders in Spain were wounded by the 2008 property crash, and
a surge in loan defaults has put them in the eye of the euro zone
again, and some analysts are predicting that a bailout will be
necessary sooner rather than later. Spain continues to rule that
Ordonez said at a Madrid conference that a reform might solve
the bank's problems in the short term, but the idea of more
capital will continue to raise its head.
"If the Spanish economy finally recovers, what has been done
will be enough, but if the economy worsens more than expected, it
will be necessary to continue increasing and improving capital as
necessary in order to have solid entities," he said.
The banking sector in Spain has been weighed down with debt
wince that 2008 housing collapse and it is currently in the
process of a third wave of consolidation which, is successful,
will cut the number of players to 12 or less from roughly 40.
The most recent reform, introduced in February, had to aim of
convincing banks to put aside 50 billion euros in order to mop up
real estate losses. Borrowing costs have gone up since, with the
markets questioning whether this move, a short term fix at best,
Spanish Prime Minister Mariano Rajoy remains positive, and he
recently announced 10 billion euros in new health and education
services, as he aims to persuade potential investors that Spain
can hit its targets for deficit reduction.
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