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MADRID – The European Union urged Spain on Thursday to come clean on how itplans to finance the overhaul of its banking sector, warning thatuncertainty over this has contributed the recent market turmoil andthe country's soaring borrowing costs. A European Commission spokesman, Amadeu Altafaj, told SpanishNational Radio that the conservative government in Madrid needed tospell out quickly how it plans to finance the recapitalization oftroubled lender Bankia SA and whether there are other banksburdened by toxic real estate assets that might need assistance. The government nationalized Bankia earlier this month, and the 19billion ($23.6 billion) in public money that will need to beinjected is more than twice what the government had estimated. Doubts over how recession-hit Spain will handle the bailout havesparked concerns that the country itself will soon follow Greece,Portugal and Ireland in asking for financial assistance. Spain'sborrowing costs on the international debt markets — a sign ofinvestor confidence in how well it can pay off its debt —have hit worrying levels while its stock prices have been taking apounding. "No one can expect that, with these negative results of some banks,the markets can react with euphoria," Altafaj said. Spain's deputy prime minister was headed to Washington to discussthe economic crisis with the U.S. Treasury Secretary Tim Geithnerand Christine Lagarde, the head of the International Monetary Fund,which has been involved in all previous sovereign bailouts inEurope. But the IMF says it has not been asked by Spain for a bailout andhas not begun preparing one. Saenz de Santamaria said that it wascoincidental that she was coming to Washington in the midst of thebanking crisis because her meetings were scheduled months ago. Lagarde called her meeting with Saenz de Santamaria productive. Shealso denied a Wall Street Journal report that the IMF was drawingup plans for a rescue loan for Spain. "There is no such plan," she said. Saenz de Santamaria said that she discussed with Geithner some ofthe ideas being discussed in Europe about how to set up a fund torecapitalize European banks. "The problem is not Spain as a country," she said. "But ourfinancial system in a given moment has needs just like the otherstates had at other times." Altafaj said it would be best if the Spanish government turned tocapital markets to finance the clean-up of Bankia, the country'sfourth largest bank, but stressed that if it is going to needexternal money it should say so soon. "What you cannot do is maintain this uncertainty, which is what isdragging down market confidence," the spokesman said. Speaking in Brussels Thursday, European Central Bank head MarioDraghi criticized national regulators — including Spain's— for choosing "the worst possible way" to help their bankingsectors by delaying tough decisions. Citing the example of Bankia's current bailout, Draghi hit out atSpanish banking authorities for underestimating the extent of thenationalized lender's problems and "then come out with a firstassessment, a second, a third, fourth." "That is the worst possible way of doing things, because everybodyends up doing the right thing but at the highest possible cost andprice." Despite months of painful austerity reforms by the new government,there is growing concern that Spain's new leaders have not doneenough and more Spanish banks may need to be saved amid mountainsof loans gone bad and foreclosures of property now worth far lessthan the loans paid out to build it. Some estimates put a completeSpanish sector bailout cost at between 50 billion and 150billion. But Spain only has 5 billion left in the 19 billionbank bailout fund it established in 2009. This means the countrywill have to raise the money in bond markets. Spain is a weak link in Europe not only because of its banks, butalso because of poor economic growth prospects that show littlesign of improvement. The economy is mired in its second recessionin three years and forecast to shrink 1.7 percent for the year.Nearly one of every four Spaniards is unemployed and one-half ofall those under 25. The spending cuts and poor economic prospects have also promptedunrest, as in other European countries. Striking coal miners onThursday became the latest group to march in Madrid, complainingthat government funding cuts in the sector doom it to collapse.Several thousand miners demonstrated, and police baton-charged onegroup that was throwing stones and bottles. Police said two peoplewere arrested and nine were slightly hurt. Deputy PM Soraya Saenz de Santamaria travelled to Washington onThursday as the borrowing costs — or yields — onSpanish bonds remained stuck at dangerously high levels. The10-year bond was at 6.45 percent, down slightly from the previousday, according to financial data provider FactSet. Spain's Ibex 35stock index closed almost flat, with a 0.01 percent drop, ending amonth of steep losses. Meanwhile, Spanish Prime Minister Mariano Rajoy's efforts tocontain the crisis won praise from German Chancellor Angela Merkel,who noted the leader "has inherited a difficult situation." "He is the first who has taken up the decision with determinationto bring transparency to the situation. That's a right andimportant step," she said. But in a further blow for Spain, Fitch ratings agency Thursdaydowngraded the creditworthiness of eight Spanish regions. Like thecountry's banks, Spain's autonomous regional governments areburdened by heavy debts. Fitch said in a statement that the downgrades "reflect the negativeeconomic and market environment in Spain, which has resulted indepressed fiscal revenues, and the structural fiscal deficits ofthe regional administrations, which will require considerableadditional efforts to be reduced, and also the difficulties inaccessing long-term funding." Also Thursday, Spain's central bank released figures that showinvestor money is gushing out of the country: a record 66.2billion in March alone, about double the figure for December, whichwas already a record. This flight stemmed from foreigners sellingstocks and shedding Spanish state debt and private bonds, as wellas Spanish banks and citizens depositing money in foreign banks. The country's trade deficit narrowed in March to 2.637 billionfrom 4 billion the same month last year, the central bank said.It attributed the change to 3.1 percent year-on-year increase inexports and a drop, by the same margin, in imports. Economy Minister Luis de Guindos told Parliament an IMF report onthe Spanish banking sector will be released June 11, and twoindependent auditors hired to assess Spanish banks' loan portfoliosand capital needs will complete their work in late July. ___ Jorge Sainz in Madrid, Barry Hatton in Lisbon, Juergen Baetz inStralsund, Germany and Desmond Butler in Washington contributed tothis report. The e-commerce company in China offers quality products such as Video SFP Transceiver , China SFP Optical Transceiver, and more. For more , please visit 10G X2 Module today!
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