Spain’s bank rescue: a victory or a brief respite?

While Spain’s government has hailed an EU-funded rescue for its debt-stricken banks as a ‘victory for the euro’, some financial experts believe it may only bring a brief respite.

With the deal aimed at releasing credit, Brussel’s is hoping next Sunday Greek voters will not elect a government which will reject its own bailout deal sparking more market turmoil, hitting Spain first.

European Commissioner for Economic and Monetary Affairs, Olli Rehn said: “It is important in order to ensure that credit can flow to companies and households in Spain and that we can contain the contagion which otherwise would be a possibility.”

The 100 billion euro fund may help those banks with bad property loans, but analysts say the issues of much needed growth and cutting the public deficit still haven’t been addressed.

Spain’s Socialist Party leader, Alfredo Perez Rubalcaba said: “We still have to act so that innocent people who have nothing to do with the situation of our banks, don’t end up paying for this European Union bailout.”

With the Spanish loan larger than needed, Brussels believes the deal removes uncertainty and is a clear signal that the euro area is ready to take decisive action to calm the markets. It remains to be seen if the markets agree.

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