Eurozone finance ministers will hold a conference call this afternoon on Spain’s banking crisis, after which it is expected Madrid will seek aid of up to 40 billion euros to recapitalise the sector.
Factor in the price of covering restructuring costs and loan losses and the total bill could be as much as double that.
The government wanted a preliminary estimate on how much is needed before making a decision and a report from the International Monetary Fund will be critical in helping to shape any request.
If Spain does ask for help, it would be the fourth country after Greece, Portugal and Ireland to seek assistance since the financial crisis began.
But David Jones, chief market strategist at IG Index, doubts it will be enough.
“I think it may just be a sticking plaster on a much bigger problem. While we are focusing on the problems in the banking sector in Spain, we still have their bigger debt problem out there so I don’t think it’s going to be a medium-term solution to this crisis for the Spanish,” he warned.
Spain’s banks have been hit by a property crash, recession and unemployment. On Thursday, one agency cut Madrid’s sovereign credit rating by three notches, to BBB.
Conference call on Spanish banking crisis