Spain takes Greece’s place in the euro crises – Europe News

In the recent memory, the former Spanish Prime Minister Felipe Gonzalez stated, "we’re in a state of total emergency, the worst crisis we have ever lived through."

Ironically, Spain has just followed the footsteps of Greece in becoming the epicentre of the eurozone crisis.

Last night the crisis was brought under discussion in a video-conference call between Angela Merkel, Mario Monti, Francois Hollande and Barack Obama. Investors are running away to safer havens, however low the return.

The problem has raised head probably the intention of Spanish government that how it intends to finance its fourth largest bank, Bankia. It was declared last week that 19bn euros (£15bn; $24bn) will have to be injected into the bank. This uncertainty has
driven Spain’s borrowing costs to 6.7%.

And beyond Bankia the extent of toxic real estate loans remaining hidden in other banks is still not clear. Estimates put the figure at around 180bn euros, but we won’t know the true picture until auditors finish their investigation next month.

The predicament was summed up by Francis Lun of Hong Kong-based Lyncean Holdings: "The Spanish banks are in distress because of real estate loans. And the hole is so gigantic that the Spanish government will find it difficult to save the Spanish banks without
blowing a big hole in its budget."

And it’s not just the aftermath of the housing and construction bubble. Some regional governments are struggling to manage their debts and their overspending.

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Posted by Irfan Khokhar on May 31 2012. Filed under Europe. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry