Spanish banks told to save more money in an attempt to avoid bailout but bond yields rise
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UPDATED:
11:21 GMT, 12 May 2012
The Spanish government yesterday
ordered its banks to set aside an extra
€30bn (24.1bn) to cover losses on reckless
property and construction loans.
It marks the fourth attempt by successive
administrations since the financial crisis to
shore up the country’s ailing banking
system.
The provision comes on top of the
€54bn (43.4bn) banks were ordered to set
aside in February.
Madrid in April: Thousands of people protested against government cuts aimed at tackling a debt crisis that has pushed the country back into recession
Spain’s prime minister Mariano Rajoy
took the action just two days after it
nationalised its fourth biggest bank Bankia.
He said: ‘The government wants complete
transparency – clarity is crucial to end any
doubt about Spain’s solvency.’
It is hoped the new package will convince
investors that Spain will not have to plough
more state money into the banks, and that
it will help avoid a humiliating bailout.
But the provision is a fraction of what
some believe is needed.
The Spanish
market fell and government bond yields
rose – indicating that the markets were
unconvinced. Spain’s banking sector was
left teetering by the collapse of its decade
long property bubble.
Two independent
auditing firms will be tasked with valuing
the banks’ exposure to the property sector.
The Spanish finance minister Luis de
Guindos said Spanish taxpayers – already in
the grip of a major austerity programme –
would have to inject less than 12.1bn.
Unemployment in the country now tops
5.6m – with one in four people out of work.
Meanwhile, the economic turmoil
continued in Greece as its stock market
plunged to the lowest level since the 1992
European Exchange Rate Mechanism.
Yesterday Wolfgang Schaeuble, the
German finance minister, signalled it was
prepared for Greece leaving the eurozone.
He said: ‘We want Greece to remain in the
eurozone. But it also has to want this and
to fulfil its obligations.’
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