Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

If Scotland Says 'Aye': Polls Say Independence Referendum Too Close to Call (part 2)

Read more

MEDIAWATCH

Scottish referendum in the media

Read more

AFRICA NEWS

Homosexuality in Africa: Kenyan movie debuts at Toronto Film Festival

Read more

DEBATE

If Scotland Says 'Aye': Polls Say Indpendence Referendum Too Close to Call

Read more

AFRICA NEWS

Ebola virus: US to send 3,000 troops to West Africa

Read more

THE BUSINESS INTERVIEW

Inger Andersen, Vice President for the Middle East and North Africa, The World Bank

Read more

FOCUS

Scottish referendum: Should I stay or should I go?

Read more

MIDDLE EAST MATTERS

Paris conference: A coalition against the Islamic State group

Read more

ENCORE!

Encore's Film Show: Spies, doppelgangers and gay rights activists

Read more

Europe

Anxious Spaniards withdraw billions from banks

Text by News Wires

Latest update : 2012-06-02

Spaniards worried about the health of ailing banks are withdrawing money at record rates, new data revealed Thursday. Figures from the Bank of Spain showed €66.2 billion was transferred abroad in March.

REUTERS - Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.

Spain is the next country in the firing line of the euro zone’s debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout.

The European Commission gave new help on Wednesday, offering direct aid from a euro zone rescue fund to recapitalise Spanish banks and more time for Madrid to reduce its budget deficit.

That helped lower the risk premium investors demand to hold Spanish 10-year debt rather than the German benchmark on Thursday, but it remained close to the euro-era record, at 520 basis points.

Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad in March, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.

Spaniards are worried about the health of their banks, hit by their exposure to a 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe.

Spain’s Economy Minister Luis de Guindos however said the data was more a reflection of the troubles of the banking sector to fund itself externally than deposits flying abroad.

The capital flight data predates the nationalisation of Spain’s fourth biggest lender Bankia in May when it became clear the bank could not handle losses from bad real estate investments, compounded by a recession.

Spain’s centre-right government has contracted independent auditors to assess the health of its financial system in an effort to restore faith in its banks.

Spain must lay out its restructuring plans for Bankia to the European Commission (EC), a spokesman for the EU executive arm said on Thursday. He added that a domestic solution to the country’s bank crisis would be better than a European rescue.

The government said on Wednesday it would finance a 23.5 billion euro rescue of the bank through the bank fund, FROB but senior debt bankers said that the syndicated bond market is currently closed for Spanish agencies.

Removing uncertainties

The prospect that Spain might not be able to handle losses at its banks has pummelled shares and the euro, although both regained some stability on Thursday.

De Guindos said that the future of the euro would be at stake in the next few weeks in Spain and Italy, adding that the rumours that Spain was negotiating financial assistance with the International Monetary Fund were “complete nonsense.”

“The battle of the euro is being fought right now in Spain and Italy,” he said at an event in Sitges, in the north-eastern region of Catalonia.

He also said Germany should help correct imbalances in the euro zone created by a loose monetary policy over the last decade and by the non-respect by Berlin of the stability and growth pact in 2003.

“We need to correct decisions which favoured Germany... Germany has to assume its part,” he said, adding that decisions in this respect would be taken in the next few days.

The Spanish government also hopes to clear doubts on Friday about how it plans to ease financing problems among its 17 autonomous regions.

Treasury ministry sources said a mechanism to back the regions’ debt would be agreed at the weekly cabinet meeting and figures showing they were on track to meet their spending cuts targets would be released.

Fitch Ratings downgraded eight regions on Thursday, warning that a failure from the government to adopt new measures would result in further ratings cuts.

Spain’s Deputy Prime Minister Soraya Saenz de Santamaria was meeting U.S. Treasury Secretary Timothy Geithner and International Monetary Fund Director General Christine Lagarde in Washington on Thursday.

The deputy PM will outline Spain’s measures to tackle its crisis during the meetings, which were scheduled before Spain’s situation reached boiling point, a government spokesman said. ($1 = 0.8069 euros).

 

Date created : 2012-06-01

  • SPAIN - BANKING

    Bankia shares drop after record bailout plea

    Read more

  • SPAIN

    Spain's Bankia requests multibillion-euro bailout

    Read more

COMMENT(S)