But the real, hard truth of Spain's banking situation is seeping out fast: last night BFA, the parent company of Bankia, reported losses of some €3.3bn. A turning point?
Very possibly. BFA had originally claimed its losses were in the region of €30m. From €30m to €3bn - some difference. That is just one banking player, mind. Bankia/BFA, the Spanish finance minister Luis De Guindos claims, is an unusual case because of its high exposure to the property market.
But the loan books of other Spanish banks have huge amounts of money bound up with developers and the construction industry. Simultaneously estimates of just how much of a bailout Bankia - it has lost more than 60% of its value since last summer - needs consistently increases. This has caused investors to demand 6.5% interest on 10-year government debt.
In short, Bankia's situation is looking increasingly like the Anglo Irish Bank (another huge player) debacle. One possible avenue to take Bankia in hand is possibly injecting BFA with the best part of €20bn of Spanish government debt (more junk debt.)
Bailout or bandaidThen, BFA could trade these IOUs with the European Central Bank. It could even catch on, with other debt-stricken countries following a similar path, some have suggested. But the Germans are not likely to endorse such a move - just another sticking plaster that doesn't address Spain/ ClubMed's long-term inherent indebtedness.
Meanwhile, watch Spain's debt costs. Once past the 7% threshold, they would be seen as unsustainable. The pattern of denial is starting to look very familiar. Spain's pain can only worsen.
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