Spanish banking fears hit euro

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Spanish banking fears hit euro

Spanish banking fears hit euro
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Spain is in focus as the euro slumped further on worries about the fate of the euro zone’s banks and the impact of austerity measures on the region’s economic growth.

The International Monetary Fund has urged Madrid to do more to push through consolidation of the country’s small savings banks, which are very exposed to Spain’s property sector collapse.

Last weekend the Bank of Spain took control of one of them, CajaSur, planning to auction it off.

That bailout is likely to be just the first of several rescues of small Spanish lenders, but analysts there stressed these have long been planned and are part of efforts to rationalise the sector.

They added that the overall stability of Spain’s financial system was not at risk.

Bank customers certainly did not seem too concerned. One said: “I’m confident that everything will turn out fine.”

Another added: “I have had my savings in CajaSur for many years now, and I am not worried.”

The head of the International Monetary Fund, Dominique Strauss-Kahn, has said that a sovereign debt crisis in Europe is the biggest threat to global economic recovery.

The IMF has warned Spain that it must make far-reaching reforms of industry, public finances and its job market if its economy is to become competitive again and a fragile recovery is to take hold.