Taxpayers to take on share of Spanish banks
If grouse have few peers in the ornithological kingdom when it comes to stupidity, their human tormentors prepared to shoot on sight in the name of sport can be similarly labelled. When the kill becomes easy, the idea of sport loses all sense of meaning.
And so it’s becoming the case with Greece as market speculators tire of putting the boot in. Like the grouse shoot, pumping more buckshot into an already riddled corpse has seen sport become an irrelevance.
But fear not, the circus now looks set to roll on to Spain where Friday’s state bailout of BFA – parent company of Bankia – Spain’s fourth biggest lender – serves as a timely reminder that all is not well on the Iberian peninsula.
The eventual size of the rescue is still in ‘pick a number’ territory, but €23.5bn and counting marks the start of yet another (the fourth in three years) clean-up of Spain’s domestic banking sector.
Harassed taxpayers certainly won’t be jumping for joy as they’ll likely now find themselves saddled with 90 percent of the bank. Or double their exposure as little as two weeks ago when Spain’s Finance Minister, Luis de Guindos said the entire sector would need only €15bn to cope with new provisions.
Still, it’s better than letting the lumbering beast, which holds 10 percent of Spanish savers’ deposits, go bust. It also serves to reinforce the point that two weeks is an eon in finance.
Such is the rapidly changing dynamic in Spain that no one knows the true scale of losses that the country’s lenders are sitting on – not even the finance minister, it would seem.
What is known is that Spanish banks have €184bn of unsellable repossessed property and sour loans on their books after a decade-long building boom that imploded in 2007-2008.
Moody’s has already cut its ratings on 16 Spanish banks. Expect further bloodletting.