by Tyler Durden
May 07, 2012
It was only a matter of time before the next bank bailout began despite all
those promises to the contrary.
Sure enough, as math always wins over rhetoric
and policy, earlier this morning the shot across the Spanish bow was fired
after PM Rajoy did a 180 on "no bank bailout" promises as recent as last
"Spain may pump public funds into its
banking system to revive lending and its recessionary economy, Prime
Minister Mariano Rajoy said Monday, signaling a policy U-turn.
The government had pledged to not give money to
the banking industry that is struggling in the wake of a collapsed,
decade-long, housing boom.
"If it was necessary to reactivate credit,
to save the Spanish financial system, I wouldn't rule out injecting
public funds, like all European countries have done," Rajoy said in
interview with Onda Cero radio stations.
The weakness of Spain's banks is weighing on
the economy that contracted 0.3% in the first and fourth quarters,
meeting most economists' definition of a recession.
The unemployment rate is at an 18-year high
24.4%, data showed April 27. Banks have sharply reined in credit in the
face of rapidly growing bad debt and problems getting finance on
And explicitly we learn that Spain will
inject EU7 bln of public funds via contingent-capital securities to
El Confidencial reports, citing Economy Ministry
officials it doesn’t name.
It actually sounds cooler in the native: "El
Estado inyectará 7.000 millones de dinero público para salvar BFA-Bankia."
So it begins. Which also means that the "Bad
Bank" idea is about to be launched. So far so good... The only problem
is that like the EFSF, like the ESM, like the IMF, all those "deus ex
machina(e)" also had to find funding of their own... and failed: it is
one thing to intend to rescue the system.
It is another to find the cash
to do it with.
In the meantime, the process has already
BANKIA SHARES FALL 4.8% IN MADRID
SPANISH PLAN FOR BANKIA TO BE ANNOUNCED
SPAIN TO CLEAN UP BANKIA, CHANGE
MANAGEMENT, OFFICIAL SAYS
SPAIN IS WORKING ON PLAN FOR BANKIA,
GOVT. OFFICIAL SAYS
Spanish Prime Minister said on Monday he
would use public funds to rescue the country's banks, but only as a last
resort. He said an announcement on government plans for the banks would
come on Friday.
Spain has already spent more than 18 billion Euros ($23.61 billion) to
clean up its banks, which were highly exposed to a property sector crash
four years ago.
The banks have been forced into several waves of mergers and to
recognize more than 50 billion Euros in losses related to property
lending and assets.
A Spanish government and Bank of Spain plan to reform
involve major changes at the bank's management, government and Bank of
Spain sources told Reuters on Monday.
"The plan is being finalized by the
Economy Ministry and the Bank of Spain. It will include major
changes in the management," a government source said.
The source also said the Spanish government
would approve on Friday the guidelines for setting up holding companies
to park and sell off toxic real estate assets, including a framework to
create 10- to 15-year "bad banks".
A source from the Bank of Spain said that the plan for Bankia, which is
likely to stick to its stand-alone strategy after the intervention,
includes the possibility of asset sales.
"The possibility of strengthening the
balance sheet through asset sales is on the table," the source said.
And more from
The ministry official added that the
government and central bank are studying a specific clean-up plan for
Bankia SA (BKIA.MC) and parent company Banco Financiero y de Ahorros SA,
which could include a shake up of their management. Daily El Pais said
Monday the government also plans an injection of state funds via
convertible bonds with a rate of about 8%.
Bankia's parent, considered one of the weakest banks in the Spanish
financial sector, recently carried out a EUR2.75 billion write-down of
the group's assets by lowering the value of its real-estate holdings.
A Bankia spokesman declined to comment.
Spain's central bank estimates the country's banks' total exposure to
the country's ailing real estate industry at EUR338 billion, of which it
considers some EUR176 billion problematic.
In new evidence of a deepening downturn, the local statistics agency
said Monday that industrial output fell by 7.5% in a calendar-adjusted
annual rate in March, after falling by 5.3% in February and by 4.4% in
Since this plan is a stillborn failure, the
countdown is now officially on to the Spanish PSI.
Only this time around, unlike in the case of
Greece, one wonders how Merkel will spin the German funding in continent
that no longer cares about "austerity", i.e., deleveraging, and is all
bout "growth", i.e., ramping up debt issuance to the max.