Skip to comments.New eurozone crisis looms as Spain prepares bail-out
Posted on 05/07/2012 11:29:53 PM PDT by bruinbirdman
A new eurozone crisis is looming as Spain signalled on Monday it was ready to bail out ailing banks after markets shrugged off election results in France and Greece.
Spain is already struggling to cope with an austerity drive that has pushed the jobless
total up to nearly 25pc of the workforce.
Prime minister Marian Rajoy indicated the Government was ready to intervene to save banks wrestling with the collapse of the housing market.
Bankia, Spain's fourth biggest bank, is the first in line for state aid. Rodrigo Rato, chairman and former IMF managing director, swiftly resigned after it was disclosed the finance ministry was preparing to refinance the bank and introduce legislation to protect the balance sheets of others.
Spain, which also signalled it could dock its only aircraft carrier to save 30m a year, is already struggling to cope with an austerity drive that has pushed the jobless total up to nearly 25pc of the workforce.
Mr Rajoy insisted that any bank bail-out would not compromise the tough targets set by Brussels to reduce the budget deficit.
Peter Kenny, managing director at Knight Capital, said Spain's action was positive because "it's them taking ownership of their own issues".
Fears of a fall-out in financial markets after the election results in France and Greece were short-lived. Shares and the euro recovered after initial falls as investors reasoned any policy changes in the eurozone recovery programme were some way off.
But the turmoil in Greece produced by a backlash against a tough austerity programme and the failure of early efforts to form a coalition government heightened speculation the country would be forced out of the eurozone.
Citi's European economics team said there was a "rising risk of a Greek exit from the euro within
(Excerpt) Read more at telegraph.co.uk ...
Nations nationalizing their businesses and docking their only aircraft carrier? Wow that will send a message.