Spanish Collapse: Last But One Piece of the Doom Jigsaw About to Be Slotted In

By John Ward

Spain, which was never going to need a ‘bad bank’ is in talks to assemble one.

The “bad bank” scheme is the latest attempt by the centre-right government of Spanish PM Mariano Rajoy, to avoid a Troika-style rescue. This rescue is that last remaining thing that Spain was never going to have that hasn’t already been had. So the end is getting nearer.

Rajoy’s Popular Party – give him his due, it’s a great name – has deepened fiscal austerity, reformed Spain’s labour market, and ordered banks to set aside an extra €54bn of bad loan provisions and capital buffers this year. But the banks have now somewhat sheepishly come back to say that’s about a third of what they need. That’s worrying, because translating bankspeak into English, it probably means it’s about 5% of what they need.

Events today have already made thing worse for Spanish bond sales: Standard & Poor’s (S&P) Ratings Services just announced it is lowering the credit rating of 16 Spanish banks  most importantly, those of Santander, and its vital subsidiaryBanco Espanol de Credito. They’ve been downgraded from A- to A-2 and A+ to A-1 respectively.

But when the markets are in a mood to think the best of a disaster, it’s amazing how much excrement you can chuck at them before they decide it tastes bad. Spain’s statistics bureau said last Friday that the country’s jobless rate rose to 24.4% in the first quarter, from 22.9% in the fourth quarter of last year; but because the recession forecast was pessimistic by 0.1%, European stocks rose.

It doesn’t take a lot to get European stocks rising these days. Thanks to all that QE and Zirp, large concerns and their bankers can buy their own shares if necessary. But 0.1% in one country about to topple over a cliff is the best bippy so far in terms of a crazy rationale for confidence. I hear there’s a donkey auction on Spetse tomorrow. Stand by for a bull market on the main Greek bourses of they sell two hind legs more than expected.

2 total comments on this postSubmit yours
  1. I have written for a number of years now that austerity would DESTROY these economies and that large scale projects would fix things. Actually–JOBS will fix things. I am so tired of hearing more bollocks from the right wing economics school. How many times do they have to TANK the world before it is obvious that their policies only do one thing—enrich them?

    What nimrods. This mess will not end well for somebody

  2. Why is it that when banks run into trouble they are salvaged by “bailout” packages instead of declaring bankruptcy and being taken into receivership and liquidated when declared insolvent and unable to pat their bills just like any other business venture on the free market? The depositors are supposed to be protected with deposit insurance and the balance left on the books can be sold to a more solvent financially stable bank that can take over operations as supposed to function in a free market economy. No financial institution is “TO BIG TO FAIL” the reality is THE BIGGER THEY ARE , THE HARDER THEY FALL!

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