The Spanish government has announced a new technocrat governor of the central bank who enjoys cross-party support.
Luis Maria Linde was appointed the the Bank of Spain board only two weeks ago. He previously handled the commercial department at Spain’s Embassy to the Soviet Union, and worked in the Economy Ministry.
The economist will have to restore the Bank of Spain’s battered reputation. Many blame it for not seeing the housing crash and subsequent economic meltdown coming.
Prime Minister Mariano Rajoy was at pains to explain why Spain is now in such a parlous state.
“Throughout Europe and USA, in 2008 and 2009, large injections of public money were made to financial institutions. We did not do it then and that is why today we are in this difficult situation. But, mark my words with total and absolute certainty, that like others who have overcome that situation, Spain will also overcome this situation,” said Rajoy.
On Monday an IMF report will confirm Spain has a 40 billion euro hole in its finances that will need to be plugged to save its banks. Except it could be much more; one estimate puts the figure at 112 billion.
“Spain’s macro-economic and budgetary policy is going in the right direction, and if and when Spain asks us to help its banking sector, it will obviously be done,” said Eurogroup President Jean-Claude Junker.
Fitch’s downgrade of Spain’s sovereign debt to Triple B status reflects the uncertainty over the amount of Spanish debt. No-one is sure exactly what the total figure needed to save the banks is.