Spain’s finance minister Luis De Guindos has a secret plan for Spain’s economy in case things worsen. This report appears after Spain partly nationalized Bankia – not the first and probably not the last bank that Spain takes over.
This report casts fresh doubts about the situation of the banks and about what the Spanish government knows about them, and will not calm the tense markets nor the euro.
The Spanish government just passed a new program requiring higher bank provisions. Rajoy said it was the “definitive” plan for the banks, and also EU Commissioner Olli Rehn said that this program should “dispel doubts” regarding the Spanish system. This was dubbed “Plan B”.
The details of “Plan C” remain secret, but the financial sector already dreads the details, that might be painful for it. Spain’s right-wing leaning ABC daily broke the news, and El Economista quotes it (original Spanish, Google Translated)
The busted real estate sector still consists of too many black holes on banks’ balance sheets, and the economy isn’t in a situation to handle theses troubles: Spain’s unemployment rate stands at 24.4%. What is De Guindos, an ex Lehman Brothers executive, preparing for the banks?
By lending too much help to the banks, Spain is following Ireland’s problematic path. Ireland did not have too much public debt, like Spain. After taking over the banks, Ireland’s debt leaped and it was shut out of the markets. This eventually led to a bailout.
The Spanish sovereign still has access to the markets, but the regional governments, provinces and banks have serious trouble: lending from the ECB leaped to over â‚¬300 billion.
Uncertainly from Greece and the fragile Spanish situation will continue weighing on the euro, that could see more falls after closing under 1.30.
For more, see the EUR/USD forecast.