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Spain Tempts Fate With Minimalist Bank Rescue

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8279872/Spain-tempts-fate-with-minimalist-bank-rescue.html

Finance minister Elena Salgado said capital injections into the cajas would “in no way exceed €20bn [£17bn]”, with a large part coming from the private sector. Spanish banks will have to boost their core Tier 1 capital ratio to 8pc, even stricter than the Basel III rules.

“This is unlikely to be a game-changer, and could potentially unwind the relief rally we have seen in the markets,” said Silvio Peruzzo, RBS’s Europe economist.

“We view €50bn as the minimum recapitalisation for the Spanish banking system that would restore investors’ confidence,” said the bank.

RBS said Spain remains caught in a vice of tightening fiscal policy and a deepening property slump that may culminate in a 40pc fall in house prices, eroding the solvency of the cajas. The Madrid consultants RR de Acuna estimate the overhang of unsold homes at 1.2m.

Mr Peruzzo called on EU leaders to take much bolder action to overcome the crisis, demonstrating that they really mean to “save Spain” by beefing up the rescue machinery. EU ministers played for time at a key meeting last week, giving an impression of complacency.

Excellent the farcical game of make up a big number begins. The finance Minister is clearly trying to boost confidence by saying on 20bn Euro's are needed. Seems the denial game is beginning and this number over the coming weeks will end up getting bigger and bigger.

So will bailing out the cajas secure the Spanish banking system?

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Excellent the farcical game of make up a big number begins. The finance Minister is clearly trying to boost confidence by saying on 20bn Euro's are needed. Seems the denial game is beginning and this number over the coming weeks will end up getting bigger and bigger.

So will bailing out the cajas secure the Spanish banking system?

I doubt it. Spains problem is that they fabricate statistics, especially around house price falls. Sales prices are adjusted to fit with the 'legal price' (set by local government) and sellers taxed accordingly. So banks can keep the repossessed properties on their books at official (+ a bit in excess) prices. The banks are repossessing properties faster than new sales and there is a overhang of 1-2million unsold properties which will forces prices down for a very long time.

So they claim that there is 300billion of bad debts but it could be a hell of a lot more

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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