Calls for a Spanish "Bad Bank"

[odie1kanobe]

I still would'nt touch it.
I'm happily renting a fine big place out here for 500 bucks a month.
I dont think I'll buy any property here or at home for a few years yet....

Wouldn't touch any with a barge pole.

People buy on basis of "Oh its a holiday home and we can rent it out and make money as well" forgetting its either one or the other but not both.

[Ulster-Lad]

Spanish banks break ECB loan record

Spanish banks borrowed €85.6 billion ($105.7 billion) from ECB last month. This is the highest amount since the launch of the eurozone in 1999. Spanish banks account for 11 percent of eurozone banking system

Spanish banks break ECB loan record - CNN.com

Spain is meeting the IMF tomorrow. They deny it is in reference to a digout but that can't be far off.

[rhonda15]

it's a defacto bank run ...

According to FT, Spanish banks borrowed €85.6bn ($105.7bn) from the ECB last month. This was double the amount lent to them before the collapse of Lehman Brothers in September 2008 and 16.5 per cent of net eurozone loans offered by the central bank.

“If the suspicion that funding markets are being closed down to Spanish banks and corporations is correct, then you can reasonably expect the share of ECB liquidity accounted for by the country to have risen further this month,” said Nick Matthews, European economist at RBS.

Bottom line: This is nothing but a sign of a run on Spanish banks. They can't get funding in the markets and there is a steady withdrawal of funds from the banks. For all practical purposes, the ECB is supporting the Spanish banking system with life support measures. This means that the ECB will have to drain funds from elsewhere in the system to sterilize this rescue operation. Without sterilization the effort becomes very inflationary, with sterilization the effort distorts the entire EU economy. It's all destabilizing.

The only reasonable alternative is to allow the Spanish banks to go into bankruptcy and restructure.

EconomicPolicyJournal.com: Bank Run in Spain and Its Destabilizing Ramifications for the Entire EU

let's face it folks the euro was a currency benefitting Germany above others

[McDave]

I thought that Spanish banks were supposed to be so well regulated that this couldn't happen.

Yes, the major Spanish banks and the government have been talking up the health of Spanish banking for a number of years. I've long suspected hubris on their part. Especially as the disconnect between the price of property (similar in Ireland and Spain at their respective peaks) and wages is even more pronounced in Spain (where wages are much lower than Ireland). Spanish estate agents have been seriously codding themselves for two years now holding out for unrealistic prices.

Spain has been heading for a fall for a long time. And the pain could be even greater as:
- unemployment is much higher;
- private sector conditions are already quite unfavourable to employees (despite current calls for labour market "liberalisation" and "deregulation"); and
- low pay will hit the ability of negative equity property owners to make repayments if they come under any extra pressure.