Post date: Jun 09, 2012 7:28:49 PM
MADRID, SPAIN (JUNE 9, 2012) (REUTERS) - Spain will make a request for aid from its euro zone partners for its troubled banking sector, Economy Minister Luis de Guindos said on Saturday (June 9).
Bankia savers speak about their concerns over their savings, Spaniards at a bullring express a combination of mistrust and resignation as Spain asks euro zone finance ministers for help.
Spain's banks are suffering a hangover from the effects of a near-decade building boom that ended in 2008 leaving lenders saddled with around 300 billion euros ($374 billion) in loans to housebuilders, equivalent to nearly one third of the country's gross domestic product.
Two recessions in three years and the highest unemployment rate amongst developed nations has compounded banks' problems, increasing the likelihood of defaults on mortgage payments and business loans.
The sudden escalation of the Spanish banking crisis was dramatised by last month's hasty nationalisation of troubled lender Bankia.
A week after the nationalisation, Bankia asked for a 19 billion euros (15.19 billion pounds) bailout to repair losses from a property crash fueling negative reactions by markets and sending the country's risk premium to record highs.
The government reassured Bankia customers their savings would be safe but doubts amongst many savers remained.
On Saturday, some Bankia savers expressed their concerns over Spain's decision to seek a bailout for the banking sector.
"To be honest sometimes I have thought about withdrawing the money from the bank. Let's hope it's not like in Argentine and the "corralito" (government measures taken to stop a bank run). So yes, of course I have thought about it. But since I don't have much money it doesn't give me a headache," Bankia client Jose said.
"I'm more worried about the lack of transparency and explanations. I have my money in Bankia and to be honest I don't have much but I'm not going to keep it under the mattress. I'm not worried. If we go to hell we all go together so there is no problem," said David, another Bankia client.
Spain is the world's 12th largest economy and No. 4 in the euro zone. EU and German officials have cited prickly national pride as a barrier to requesting a full assistance programme.
At the iconic Las Ventas bullring, Spanish flags were on display as people waited for the evening's bullfight.
Spaniards expressed anger and dismay with Spain's banks, which the IMF said in their report on Friday (June 8) would need at least 40 billion euros in extra capital injected into several banks to allow them to withstand severe economic conditions.
Jose Couto said he didn't understand why Spain went from having what many described as one of the best financial sectors in the world to needing to seek assiatnce.
"Why is it that until now the the banks distributed dividends, so much was loaned, the finacial system which was the best in the world worked and now all of a sudden we now have this situation because they either didn't want to tell us or they didn't know themselves," he said.
Herminia Herrera, a former bank worker, was dismayed to see that banks who had refused to help people with loans on many occasions will now be rescued with tax payers' money.
"I have seen many people ask for loans and they haven't been given credit but now they (the banks) need the help of every single Spaniard to pay the debt. And when they bail us out the debt we will incur will be quite large," she said.
Until the end of this week, Prime Minister Mariano Rajoy was flatly denying Spain would be seeking funds for the banking sector, a move that seems to have hurt his credibility among the electorate that gave him a landslide victory in November.
"The feeling is they (politicians and bankers) are playing with us, that bankers are calling the shots and they will get the roses and we will have to pay everything," Jose Ortiz said.
The sense of gloom amongst the people however was only mitigated by resignation.
"Well initally I thought this would not happen but I think we all knew it would happen expecept those that had to make the decision. But if it's for the better, then it (the bailout) is the best for everyone," Francisco Garcia said.