Deadline: tomorrow! Help meet our fall fundraising goal GIVE NOW
BBC World Service

Solutions for Spanish banking crisis dwindle

Tom Burridge May 31, 2012
HTML EMBED:
COPY
BBC World Service

Solutions for Spanish banking crisis dwindle

Tom Burridge May 31, 2012
HTML EMBED:
COPY

David Brancaccio: Word today from Madrid is that deputy Prime Minister Soraya Saenz is heading to Washington to discuss with Treasury Secretary Tim Geithner ways to resolve the problem. At the same time, the European Commission is calling on the Spanish government to clearly spell out plans for rescuing one of its biggest banks.

Joining us now from Madrid is the BBC’s Tom Burridge. Good morning.

Tom Burridge: Hi there.

Brancaccio: So Tom, the Spanish government has really failed so far to detail how it plans to do some kind of rescue for Bankia, the fourth largest bank there. What kind of options might it have?

Burridge: If you were to believe rumors circulating around Spain in recent days then there was some kind of plan that involved the ECB, the European Central Bank, by which it might have bought Spanish government bonds — basically lending money to the Spanish government which would then be used to recapitalize Spain’s banks. If you look at the statements coming from the ECB in recent days, that plan seems to have gone away. Therefore, we are left with two options. The first is that the government would have to go to the markets to borrow money, but the borrowing rates on Spanish debt are getting horribly high. Therefore we are left with one option, that might be a bailout coming from other European countries.

Brancaccio: What do you think this means for the rest of the Spanish banking sector. We’ve been focused on Bankia, but there are other banks — also banks that may be vulnerable to the collapse in property values there.

Burridge: Well Spain’s banking system can essentially be split into two I think. First are these small savings banks or regional savings banks of which Bankia is the biggest. If you chat to economist here in Spain, they’ll tell you that three other of these small savings banks are in trouble too. But if you look at Spain’s two biggest banks for example, Santander and BBVA, they’ve got many more assets abroad as well and they are generally considered to be in a much safer position.

Brancaccio: Tom Burridge, BBC.

Burridge: Thank you.

 

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.