Spain’s part-nationalisation of Bankia sparks fears over fresh Eurozone crisis
SPAIN’S dramatic decision to part-nationalise its fourth-biggest bank, Bankia, last night escalated fears over the implications of a fresh Eurozone crisis.
The deal, which means the state will now have a 45 per cent stake in Bankia, due to the conversion of its previous €4.5bn bailout loan into shares, marks a U-turn for Prime Minister Mariano Rajoy who had previously insisted that he would not use state funds to rescue the banks.
The economy ministry said last night that it would provide only the capital that’s “strictly necessary” to clean up the lender, and said that Bankia management would have to submit a “clean up plan” to put it on a stronger financial footing as soon as possible, including an asset sell-off.
The announcement comes just two days after Bankia chairman Rodrigo Rato said he would step down, and ahead of Rajoy’s detailed announcement of plans to shore up the banks, expected tomorrow. These include moving toxic assets out of some banks and demanding that banks set aside €35bn against loans to the moribund building sector, on top of €54bn the banks have already allocated for this.
Some Spanish lenders are unlikely to be able to find the extra funds without public help, raising expectations the government may have to issue more debt to bail them out.
“It depends what’s announced, but right now it feels like smoke and mirrors and not the cathartic moment that Spain needs. It looks more like the government has panicked and pushed something out,” Ben Levett, an analyst at the consultancy 4Cast, said.