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Spain’s latest efforts to restructure its endangered regional banking system could lead to “political war,” according to Moody’s (via Cotizalia).The fight is between the central government of Prime Minister Zapatero and the regional governments. If the central government does pump money into the regional banks, power and dominance of those entities will shift from local regions of Spain to the central goverment, something many regional leaders are not comfortable with.
From what we understand, the Governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, is also against the more aggressive recapitalization measures being proposed as he feels those in place are already working.
Just last week, the price for Spanish government spending on its troubled banking system was pegged at €80 billion.
What this all means is that the process of sort out the situation in Spain’s regional banks, or cajas, is likely to take longer than last week’s headlines indicated. This could add to the uncertainty around the Spanish situation, and influence markets’ perspective on the country’s stability.