Spain banking system in need of a bail-out plan, real problem still in grey zone – Part 1

Soon after the 2008 crisis that hit the West the most, Europe went on a shopping spree, borrowing money from banks in huge sums. Now the bad debts are haunting the whole continent like the notion of Armageddon. Spain is not an exception and is on the verge of collapse if the European Union does not inject a financial stimulus.

Countries across Europe have been issuing ambiguous statements to the media and the public about the original cause for the sovereign debt crisis and the extent to which it is hurting and/or has capability to do so in the near future. However, Spain in particular has been double talking about how much stimulus it needs to bail the banking sector out from possible bankruptcy or bankruptcies.

It is estimated that Spain might need a bail-out plan in tune of some $120 to $400 billion. There has been no official statement from any source what exactly they need but that is the rough estimate contemplated from various sources.

Also, there is a misconception in the rest of the world that this crisis in Europe might be solvable through better political reforms. However, in the light of some recent events it is not a political issue anymore. The banking sector in Europe, especially in Spain is in dire need of money.

Only Bankia in Spain is estimated in need of around Euro 40 Billion, around $50 Billion, mainly due to the increasing bad debt rate that has soared to 30 percent this month. However, this estimate by China Daily is based on strict rules of investigation. Bankia itself has asked for around 19 Billion Euros from the government in quantitative easing.

The Spanish banking black hole is estimated to have incurred losses in bad debts in the neighbourhood of 180 Billion Euros. This is a huge amount that the banks alone in Spain are asking.

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Posted by Usman Khalid on Jun 9 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.