Santander’s capital hike shows value of self-help 9 Jan 2012 The Spanish lender has met EU demands for a 15 bln euro capital boost six months early. Bigger bad loan provisions and extra buffers for systemic banks mean it is not yet in the clear. But with rival UniCredit’s rights issue under pressure, avoiding a big cash call is a distinct advantage.
Hugo Dixon: Semantics could help euro 9 Jan 2012 There is a crying need to distinguish between fiscal austerity and structural reform. The endless austerity programmes adopted by the GIIPS could spiral out of control. By contrast, structural reform could make them dynamic.
Spain’s bank plan risks being more of the same 6 Jan 2012 The country’s economy minister wants lenders to set aside another 50 billion euros to cover property losses. That sounds good in principle, but doesn’t explain how the banks will pay for it. Forcing weaklings to merge with stronger rivals can help, but is no magic bullet.
Spain is still struggling with its deficit maths 5 Jan 2012 The new conservative government is scrambling to cut the deficit from more than 8 pct of GDP last year to 4.4 pct in 2012. The adjustment will be more difficult if the economy worsens. Madrid is taking the right steps, but there is no room for complacency.
Spain must turn brain drain into gain 23 Dec 2011 Anecdotal evidence suggests that rising numbers of university graduates are fleeing Spain and its sky-high unemployment. A prolonged exodus is a risk, although there could be a silver lining to a temporary outflow of graduates abroad.
Repsol saves Sacyr from creditor hell 20 Dec 2011 The Spanish oil and gas company is buying 10 percent of its shares currently owned by the deeply indebted construction company. Sacyr can now reach a deal with its banks. It is not a great use of Repsol’s cash but the alternatives could have left it even worse off.
Incoming Spanish PM prepares to wield axe 19 Dec 2011 Mariano Rajoy, Spain’s incoming leader, has broken his silence as he prepares to take over the battered economy. The emphasis on reforms, jobs and austerity looks right, even though the speech was uninspiring. But the earmarked 16.5 billion euros of budget cuts is a bit short.
Telefonica’s divi cut doesn’t solve the problem 15 Dec 2011 The Spanish telco has bowed to what the market has long seen as inevitable. But shaving the shareholder payout by only 14 pct may still leave Telefonica short of financial flexibility. To get there, it has to take more tough decisions. Asset sales are possible.
Sacyr faces steep cost of botched diversification 14 Dec 2011 The Spanish construction group must repay by next week the 4.9 billion euro margin loan it took out to finance a 20 percent stake in Repsol. With the investment underwater, there is no easy way to do it. The banks hold the whip, but they will probably have to share some pain.
Supersized IMF not just for little guy bailouts 9 Dec 2011 Europe’s promise to lend another $270 bln takes the fund’s pot over $1 trln. The move also raises the chance of fat contributions from the BRICs, who have insisted on more euro zone self-help. The muscled-up fund may soon have the scale to help rescue big nations like Spain.
Latin America gets closer even as Europe cracks 8 Dec 2011 Cross-border deals among South American companies, like Chilean CorpBanca’s purchase of Santander Colombia, set a new record in 2011. A single Latin currency seems remote given the euro’s woes. But as the region’s private sector consolidates, it can’t be ruled out for ever.
Spanish banking sector to pay for its sins 8 Dec 2011 Banco Sabadell is taking troubled lender CAM off Madrid’s hands, and Spain’s bank-backed deposit guarantee fund is helping by making a big capital injection. Such deals minimise the cost to the taxpayer, but aren’t a free lunch for the state and won’t solve the sector’s problems.
Piecemeal solution would suit bust Spanish caja 2 Dec 2011 Sabadell was the only bank that made an offer for CAM, after other bidders backed out. Now Spain’s central bank must decide whether it sells the caja with all sorts of expensive guarantees. Alternatively, it could sell the good parts. This option may be the least painful.
Euro IMF scheme raises four questions 1 Dec 2011 The latest wheeze for solving the crisis is for national central banks to lend money to the IMF which will then pass it to Italy and possibly Spain. But how much money will be available, who will provide it, where will they get it or who will bear the risk?
Italy, Spain may be best off with fast trip to IMF 28 Nov 2011 If market confidence can’t be restored rapidly, Monti and Rajoy – the countries’ new PMs – should consider asking for help while they can still blame their predecessors. The snag is the IMF doesn’t have enough cash. So its resources would need beefing up, probably by the ECB.
Spain SA braces for change in political guard 25 Nov 2011 Unlike the outgoing socialists, the conservative party was notorious for its interventionism when it was in power in the 1990s. Much has changed since then. But the new government will inevitably have a greater say – particularly with the banks.
Santander’s stingy bond swap a sign of the times 23 Nov 2011 The Spanish lender’s plan to exchange junior debt for less attractive senior paper may be unpalatable for bondholders. But holding out isn’t much more attractive. With EU lenders under pressure to boost capital and refinancing rates high, investors had better get used to it.
Spain’s next government: now for the hard part 21 Nov 2011 Mariano Rajoy’s People’s Party has won an absolute majority. The new prime minister has made all the right commitments, but markets are sceptical. He needs to show he’s serious even before he takes office in a month. He – and the markets – also need support from the ECB.
How to fix Spain’s real estate problem 18 Nov 2011 The country’s main opposition party is mulling the creation of a state-backed bad bank to deal with dud real estate loans. This approach has worked elsewhere. But the government can force entities to own up to losses without saddling taxpayers with the dross.
Spanish debt storm piles the pressure on Rajoy 16 Nov 2011 At current yields, Spain would need a primary surplus of 1.8 percent just to keep its debt/GDP stable in the long run, according to a Breakingviews calculator. Madrid is forecast to have a deficit of 3.5 percent in 2012. The next PM will need to re-establish confidence fast.