Sunday, June 10, 2012

BREAKINGVIEWS: Spain still vulnerable post mega bank bailout

(The authors are Reuters Breakingviews columnists. The opinions expressed are their own)

By Fiona Maharg Bravo and Hugo Dixon

(Reuters Breakingviews) - Spain is still vulnerable after its mega bank bailout. Madrid has finally got a credible plan for its lenders: it will receive up to 100 billion euros from its euro partners to boost their capital. But the state's debt will rise as a result, the economy is still shrinking and the government has lost a lot of credibility. Spain may yet require a full bailout. That would really test the single currency.

The 100 billion euro figure is at the top end of most analyst estimates, and more than double the 40 billion euros that the International Monetary Fund had estimated the banks needed. It should go a long way towards reassuring investors that Spanish lenders are sufficiently capitalised to withstand shocks. It should also reduce the risk of a bank run if there is trouble following next Sunday's Greek elections. It may even help limit a severe credit crunch. Read More