Spain’s woe deepens as deficit rises
Worries over the health of Spain’s banks kept its government’s borrowing costs dangerously high yesterday, while new data showed the budget deficit is rising as the state gives more money to cash-strapped regional authorities.
In the latest sign of tensions within Spain over the state of the economy and the banks, Bank of Spain governor Miguel Angel Fernandez Ordonez announced yesterday he would step down on 10 June, one month earlier than the end of his mandate.
Stricken lender Bankia told regulators it is seeking to raise €55bn in debt over the next five years, while it also needs a €19bn bailout from the government to enable it to access European Central Bank (ECB) funding again. Reports last night suggested the ECB could torpedo the plan.
The country’s stock market was the only major bourse to record losses yesterday, after data showed retail sales dropped by nine per cent – the fastest pace ever – in the year to April.
Meanwhile, savings bank Liberbank is in talks about a possible merger with Ibercaja and Caja 3, to bulk up their capital as they struggle with €11.8bn (£9.42bn) of bad property debt.
Investors are worried that the government will not be able to afford to keep bailing out banks, after it announced its budget deficit is rising, rather than falling as planned, because it gave more money to regional governments.
The deficit hit €25.5bn from January to April, up €8.7bn on the same period of 2011.