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EURO ZONE: Spanish banks in critical condition

 

The "Spain does not need any kind of external support" to save its banking sector. If Luis de Guindos, Spanish Minister of Economy, felt the need, Monday, May 21, to emphasize his country's ability to overcome its difficulties alone is that more and more people are concerned about this great new European body sick.

The rating agency Moody's cast, Thursday, May 17, a cold by breaking the mark of 16 Spanish banks. Francois Hollande, the new French president, had called the next day, the activation of a "European solidarity mechanism" to clean up banks' balance sheets Spanish. Finally, Brussels urged Madrid to launch as soon as possible an audit of its financial sector and the prime minister, Mariano Rajoy, has mandated the weekend, the "independent experts" for this purpose.

Even more doubtful accounts

The Spanish banking sector seems, indeed, entering a critical phase of its existence. "Currently, 60% mortgage-owned banks are bad," explains Pascal for FRANCE 24 in Lima, the banking sector economist and professor at ; Sciences-Po Paris. That means over 180 billion euros - on loan during the years of euphoria estate (2000-2007) - Spanish financial institutions which may never see the color.

Blame it on the explosion of the housing bubble in Spain in 2007. "Since then the price of the stone fall and the recession that the country sinks further aggravates the situation," said Danielle Schweisguth, a specialist from Spain to the French Observatory of circumstances é ; ECONOMIC (OFCE). In 2012, the fourth European economy should see its GDP fall by nearly 2% (1.7% according to the latest government projections released on Monday). A contraction is likely to "further increase the number of households in need who can not pay their mortgage," Pascal fears of Lima.

Banks may therefore have to further increase their provisions to cover possible unpaid. "All this money that Spanish banks are setting aside, they do not lend to businesses and households, which weakens the economy further," said Pascal de Lima who believes that Spain has entered a vicious circle from which it is difficult to escape.

Cartridge last chance

The scope for Saving Private banking is very thin. The main sector mergers have already taken place, and that since 2007 "it has clearly not been enough to make it strong," says Pascal de Lima. Moreover, if the government nationalized two weeks ago, Bankia, "Madrid does not have the resources to nationalize all banks in trouble," says the specialist.

There remains the prospect of international financial support as that enjoyed by Greece, Ireland and Portugal. Such a plan - which could reach 300 billion euros - may yet suck money out of the European Financial Stability Mechanism. However, the situation would not require even grilling this cartridge last chance, as Pascal de Lima. This specialist is preferred that the European Central Bank plays firefighters ... hoping that Spanish banks resist time out of recession.