Spain finally bowed to the rising interest rates and the billions of
euros worth of bad loans at Spain’s regional governments to ask for a
loan. After emergency talks between Euro Zone finance ministers on
Saturday, Spain will get up to $125 billion from the European Union (EU)
to bail out its banking system.
The move came three weeks after Bankia, the nation’s fourth largest bank, asked the government for a $24 billion bailout. Spain’s economy and financial system are still reeling from the collapse of a massive real estate bubble (house prices have dropped by 25% since 2008) and the subsequent Great Recession. Bank bad loans as a percentage of total lending jumped to 8.4% in March, the highest since August 1994, and a majority of Spain’s financial institutions are saddled with debts much greater than their assets.
The $125-billion aid sought by Spain is about 270% of the amount estimated by an IMF study released June 8, but close to the $126 billion projected by a report from Fitch Ratings released on Friday. The aid money will come from two funds – the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).
Read more: http://econintersect.com/wordpress/?p=23200
The move came three weeks after Bankia, the nation’s fourth largest bank, asked the government for a $24 billion bailout. Spain’s economy and financial system are still reeling from the collapse of a massive real estate bubble (house prices have dropped by 25% since 2008) and the subsequent Great Recession. Bank bad loans as a percentage of total lending jumped to 8.4% in March, the highest since August 1994, and a majority of Spain’s financial institutions are saddled with debts much greater than their assets.
The $125-billion aid sought by Spain is about 270% of the amount estimated by an IMF study released June 8, but close to the $126 billion projected by a report from Fitch Ratings released on Friday. The aid money will come from two funds – the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).
Read more: http://econintersect.com/wordpress/?p=23200
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