The Spanish Government Is About To Pump Up To $107 Billion Into Its Banks


Photo: Wikimedia Commons

The Spanish government intends to pump as much as €80 billion ($107 billion) into its local banks, or cajas, in a bid to provide greater stability to the system, according to Cotizalia (via FT Alphaville).The injection, which Cotizalia dubbed megainyección, will be at least €30 billion but could go as high as €80 billion.

Spain’s cajas were heavily revamped in 2010, with many small banks combining to form larger entities. These smaller, local banks (not the national powerhouses of Santander and BBVA) were heavily involved in lending to the commericial and residential real estate sectors in Spain.

Many of those loans made are now troubled, due to the real estate crisis in Spain, which sees ghost estates of homes unoccupied (check out this video for a glimpse of those estates).

The ECB has provided support to the Spanish banking system, and some say it’s the only thing keeping the cajas solvent. Spain’s banks increased their borrowing from the ECB last month, to €67 billion from €61 billion the month previous.

Now, here’s a complete guide to the imminent Spanish debt crisis everyone is scared of >

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