|Spain urged to come clean on bank bailout plan|
|Written by DANIEL WOOLLS|
MADRID (AP) 5/31/2012
The European Union urged Spain Thursday to come clean on how it plans to finance the overhaul of its banking sector, warning that uncertainty over this has contributed the recent market turmoil and soaring borrowing costs.
As Spain's deputy prime minister headed to Washington to discuss the country's economic crisis with the U.S. treasury secretary and the head of the IMF, a European Commission spokesman, Amadeu Altafaj, told Spanish National Radio the conservative government in Madrid needed to spell out quickly how it plans to finance the recapitalization of troubled lender Bankia SA and whether there other banks burdened by toxic real estate assets that might need assistance.
The government nationalized Bankia earlier this month, and the €19 billion ($23.63 billion) in public money that will now be injected into it is more than twice what the government originally estimated would be needed. Bankia's share prices have plummeted since it was formed a year ago from the merger of seven troubled cajas, or savings banks.
"No one can expect that with these negative results of some banks the markets can react with euphoria," Altafaj said.
He said it would clearly be better if the Spanish government turned to capital markets to finance the clean-up of Bankia, Spain's fourth largest bank, but stressed that if it is going to need external money it should say so soon.
"What you cannot do is maintain this uncertainty, which is what is dragging down market confidence," the spokesman said.
Deputy PM Soraya Saenz de Santamaria is making the trip to Washington as yields on Spanish bonds remain at dangerously high levels amid worries over Spain's public finances and its troubled banking sector. The 10n-year bond opened Thursday with a yield at 6.61 percent, down 2 basis points from a day earlier, according to financial data provider FactSet..
Saenz de Santamaria will confer with Treasury Secretary Tim Geithner and IMF managing director Christine Lagarde.
Investors gave Spain a beating on Wednesday following reports that a plan to finance the €19 billion bank bailout of Bankia by using government debt as collateral to get cash from the European Central Bank had been rejected by the central banking authority.