290 lines
8.9 KiB
Plaintext
Executable File
290 lines
8.9 KiB
Plaintext
Executable File
finance
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financialcrisis
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8279872
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-----
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# Spain tempts fate with minimalist bank rescue
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## Spain has set in motion a partial nationalisation of its crippled savings
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banks, or cajas, but stopped short of the giant rescue deemed necessary by
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some experts to contain the country's festering crisis.
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![Spain tempts fate with minimalist bank rescue. Elena Salgado, the Spanish
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Economy Minister, said the country's savings banks have seven months to boost
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capital through private investors or the state will partially take them
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over.][1]
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Elena Salgado, the Spanish Economy Minister, said the country's savings banks
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have seven months to boost capital through private investors or the state will
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partially take them over.
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[![Ambrose Evans-Pritchard][2]][3]
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By [Ambrose Evans-Pritchard][4] 9:55PM GMT 24 Jan 2011
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[Comments][5]
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Finance minister Elena Salgado said capital injections into the cajas would
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"in no way exceed €20bn [£17bn]", with a large part coming from the private
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sector. Spanish banks will have to boost their core Tier 1 capital ratio to
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8pc, even stricter than the Basel III rules.
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"This is unlikely to be a game-changer, and could potentially unwind the
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relief rally we have seen in the markets," said Silvio Peruzzo, RBS's Europe
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economist.
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"We view €50bn as the minimum recapitalisation for the Spanish banking system
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that would restore investors' confidence," said the bank.
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RBS said Spain remains caught in a vice of tightening fiscal policy and a
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deepening property slump that may culminate in a 40pc fall in house prices,
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eroding the solvency of the cajas. The Madrid consultants RR de Acuna estimate
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the overhang of unsold homes at 1.2m.
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Mr Peruzzo called on EU leaders to take much bolder action to overcome the
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crisis, demonstrating that they really mean to "save Spain" by beefing up the
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rescue machinery. EU ministers played for time at a key meeting last week,
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giving an impression of complacency.
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## Related Articles
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* [Spain to rescue its banks][6]
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21 Jan 2011
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* [Pimco: Spain's banks 'weakest link'][7]
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21 Jan 2011
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* [The eurozone is in bad need of an undertaker][8]
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12 Dec 2010
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* [Spanish debt auction pushes borrowing costs to decade high][9]
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16 Dec 2010
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* [Markets fall on Spain fears][10]
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15 Dec 2010
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* [Spain: Europe's fifth largest economy by numbers][11]
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15 Dec 2010
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A report by RBS said the real firepower of the EU's €440bn bail-out fund must
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be greatly increased to cope with the risk of a full-blown Iberian crisis. The
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fund should be allowed to buy Spanish and other eurozone bonds pre-emptively,
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and recapitalise banks.
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EU leaders are starting to recognise that the sort of loan packages provided
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to Greece and Ireland are no answer to a solvency crisis caused by excess
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debt, but have not yet agreed to a formula that allows these economies to claw
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their way back to health.
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RBS said there is a risk that new proposals in the pipeline will not be
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"forceful enough" to mark a turning point in the eurozone drama. It said Spain
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"will remain exposed to contagion", unless the EU takes pre-emptive action.
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Goldman Sachs takes a rosier view, deeming Spain to be fundamentally
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"solvent". It estimates further caja losses at €15bn. Even if Spain slips into
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a double-dip recession this year under a "pessimistic scenario", public debt
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will peak below 90pc of GDP. Exports are recovering, with car shipments at
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record highs.
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Analysts are split over the true state of the cajas. Arturo de Frias at
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Evolution Securities said parts of Spain's banking system look "Irish". The
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"problem ratio" on €439bn of property debt may reach 60pc. "We calculate a
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worst case of €142bn future impairments - €59bn for banks, and €83bn for the
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Cajas," he said.
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Brussels clearly fears that Spain is still at risk. Olli Rehn, the EU's
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economics commissioner, called for urgent action to beef up the rescue fund
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(EFSF) before the next spasm of debt jitters. "We need to agree as quickly as
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possible. The recent lull in market tensions gives us breathing room, but we
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can't sit back: we must act now with full determination," he told Die Welt.
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Mr Rehn said EU leaders must redesign the bail-out fund so that it can lend a
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full €440bn. "If you buy a Mercedes with 440 horsepower, you want all 440
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horsepower," he said.
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The EFSF has a lending limit near €250bn owing to the need for extra
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collateral to anchor its AAA rating. EU experts are exploring ways to boost
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the total without needing fresh money from member states, which would entail a
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Bundestag vote at a bad moment before regional elections.
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They have support from German finance minister Wolfgang Schauble, who said the
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EU cannot keep "stumbling from one crisis to the next". But the Free Democrats
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(FDP) and Bavaria's Social Christians are still dragging their feet within the
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ruling coalition.
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Guido Westerwelle, the FDP leader, has sounded euro sceptic over recent weeks,
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accusing EU officials of trying to bounce Germany into signing a blank cheque
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for a "Transferunion", arguably in breach of both German and EU treaty law. He
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admonished EU officials for their "ex-cathedra" demands, reminding them that
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the rescue fund remains the prerogative of the member states that pay for it.
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"It bothers me that some in Europe seem to think nothing has happened in this
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financial crisis, and think they can solve the problem by taking on fresh
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debt," he said, invoking the name of Ludwig Erhard, the free-market apostle
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who created the foundations of the post-war German miracle.
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Jean-Claude Juncker, head of the Eurogroup, said the FDP's new tone is
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alarming. "I am appalled by how some German liberals are compromising their
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European political heritage. It is deeply painful for me to see that some in
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the FDP are now flirting with a populist course regarding Europe," he told
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Spiegel.
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Mr Juncker said icily that Germany was not the only country in Europe with a
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AAA-rating and is not the only contributor to the EU bail-outs. "We could
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criticise the Greeks, Portuguese and others more credibly if Germany and
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France hadn't violated the Stability Pact on purpose in 2003," he said.
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**Get free advice on protecting your assets with the [Telegraph Wealth
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Management Service][12]**
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http://www.telegraph.co.uk/finance/financialcrisis/8279872/Spain-tempts-fate-
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with-minimalist-bank-rescue.html
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Telegraph
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## [Financial Crisis][18]
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* ### [Finance »][19]
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* ### [Ambrose Evans-Pritchard »][3]
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* ### [Economics »][20]
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In finance
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[![Truncheon-wielding police in Barcelona have clashed with protesters at a
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makeshift camp that is one of dozens erected in Spain to protest at high
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unemployment][21] ][22]
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### [Spanish anti-crisis protests][22]
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[![Thousands of protesters occupy Puerta del Sol square in Madrid][23] ][24]
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### [Huge protests in Madrid][24]
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[![Riot police use tear gas as protesters throw petrol bombs in Athens][25]
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][26]
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### [Tear gas and petrol bombs][26]
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[![Irish bank stress tests: the key points][27] ][28]
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### [Irish bank stress tests: key points][28]
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[![Q&A: What is the Independent Commission on Banking?][29] ][30]
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### [Q&A: What is the Independent Commission on Banking?][30]
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[What are these?][14]
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Share:
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* [ ][13]
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* [ ][15]
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* [ ][16]
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* [Tweet][17]
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* Advertisement
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![][31]
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telegraphuk
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Please enable JavaScript to view the [comments powered by Disqus.][32] [blog
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comments powered by Disqus][33]
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[![][34]][35]
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