Spain has started working with European Union officials on a potential bailout, according to a report in the Financial Times today, but if it goes ahead it will be a different beast to the three post-crisis bailouts already announced.
Spain’s sheer size means that its combined gross domestic product is bigger than all the previously bailed-out nations: Ireland, Portugal, and Greece.
The source of its pain is also different to the sovereign debt problems of Greece. Spain’s ratio of debt to gross domestic product is lower than Germany’s, and it has been narrowing its current account deficit.
The results of Spain’s financial sector review by auditor Oliver Wyman will be announced next Friday. The government is also preparing a new budget for 2013, to be announced next week, which the EU is believed to be helping shape ahead of a bailout announcement. Speculation about what both will contain has already increased.
Francisco Gonzalez, chairman of BBVA, predicted on Thursday that Spanish banks will need 70 billion to 80 billion euros ($91 billion to $104 billion) to plug a capital shortfall, much higher than the 51 billion to 62 billion euros ($66 billion to $80 billion) estimate that Oliver Wyman made in June and IMF forecasts of around 40 billion euros ($52 billion).
via CNBC
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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