Photo: Wikimedia Commons
Spain is set to announce a new plan to fix its banks this Friday, and excitement ahead of that has propelled the IBEX 35 upwards by 2 per cent today.Prime Minister Mariano Rajoy said today that the government could use public funds to step in as domestic banks’ “last resort,” according to Bloomberg. This marks a departure from earlier policies in which the government refused to devote public funds to bank bailout efforts.
Troubled Spanish bank Bankia is also at the centre of today’s buzz. Executive chairman Rodrigo Rato resigned today, and according to an Economy Ministry official cited by Bloomberg, the government will buy the bank’s contingent-capital securities to bolster its finances.
Spain’s banks have been under fire, as they struggle under the weight of failing real estate loans. The bursting of the real estate bubble has overflowed into other sectors of the Spanish economy.
“The last thing I want to do is lend public money, as has been done in the past, but if it were necessary to get the credit to save the Spanish banking system, I wouldn’t renounce that,” Rajoy told the Spanish Onda radio.
Check out the IBEX 35 today: