Spain is planning a partial nationalization of its savings banks, according to Friday reports, in an effort to reassure investors about a potential Ireland-style rescue. Such positive action did not halt yet another rise in the Euribor, which has been increasing steadily since the European Central Bank (ECB) issued a warning last week about inflation.
According to Reuters, the move to partially nationalize the nation’s cajas comes in the wake of a previous government order for banks to merge; of the 45 cajas formerly in existence, only 17 remain as a result of consolidations. Five banks failed their stress tests in 2010 and Spain’s bond yields had been steadily punished as a result, with concerns over the need for a bailout generating worries about the viability of the European Financial Stability Facility (EFSF). The EFSF would be able to handle another bailout of a nation the size of, say, Portugal, but Spain, with the fourth largest economy in the European Union (EU), could tax it to the breaking point.
Economists and analysts were positive about the move, and investors were as well; Spain’s benchmark 10-year bonds rose to their highest prices since early December, and even shares in Spain’s largest banks rose to three-month highs.
The head of sovereign ratings at Fitch’s debt rating agency was quoted as saying that the move would be a “net positive” if recapitalization of the banks comes in at around 50 to 60 billion euros ($67.603 billion to $81.123 billion) and the government’s plan is valid.
Lenders, meanwhile, weren’t taking any chances. Euribor three-month rates hit 1.025%, up from Thursday’s 1.016%; that’s the largest single-day rise since Oct. 21. Six-month rates were also up, although not in such large proportions, and the one-week rate went from 0.710% to 0.746%. The 12-month rate hit 1.578%, a 1½ year high.
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