One bust bank could bring Spain to its knees, warns prime minister
Government will not allow any bank or regional government to collapse "otherwise country will fall," says Mariano Rajoy
Spain cannot afford to let a single bank or regional government collapse as that would bring the entire country to its knees, the prime minister, Mariano Rajoy, warned on Monday.
In a rare and unexpected appearance before the press, Rajoy failed to calm markets which had reacted nervously to Spain's biggest-ever bailout, the €23.5bn rescue of Bankia announced on Friday.
"We are not going to let any region or financial entity fall, because otherwise the country would fall," he said.
The cost of Bankia's bailout has spiralled over the past three weeks and a revision of its 2011 accounts over that period has seen losses at parent company BFA multiplied by 100. On Monday night the company was set to report the biggest loss in Spain's banking history - of somewhere above €3.5bn (£2.8bn). It had originally declared just €30m in losses.
Nervousness that other Spanish banks may be hiding similar-sized holes saw Spain's borrowing costs soar once more, with investors demanding 6.5% interest on future 10-year debt. That took the rate dangerously close to the unsustainable levels at which other eurozone countries such as Portugal had to request a bailout. ...