The fear over Spain returned yesterday. Spain’s risk premium shot to a new record high on Friday after officials in Valencia formally asked the central government for funds to help pay the region’s mounting bills, including the high prices of prescription drugs. Yields soared and spreads exploded to 610 points over the German bund. Ibex collapsed almost 6 %. All this is taking place, while the politicians still live in total denial. From El Pais.
At first, Montoro said that he wasn’t aware that Valencia government officials had announced about an hour earlier that they would be the first region to formally tap into the Regional Liquidity Fund (FLA), a system that was created just over a week ago that allows cash-strapped regions to access financing but under stringent guidelines.
“Valencia is not getting a rescue,” said deputy regional premier José Císcar during his own news conference. “We are tapping into a mechanism of financing that more regions will be using in the coming days, but without any more adjustments.”
After first denying it, Montoro explained that the region will tap into FLA and would indeed “be obligated to follow new conditions. (full article here)
Meanwhile, Madrid is under siege by the anti austerity protesters. Espana, everything under the sun. To be continued, as the big elephant now starts moving. The question is whether Rajoy is “cutting too far and too fast’. Video below.
Meanwhile in Madrid things are heating up. From El Pais.
Two days after the central government delegate in Madrid, Cristina Cifuentes, noted that the “black march” organized by protesting miners had been entirely without incident, the denouement of the 430-kilometer journey descended into violence in the center of the capital.
The 200 marchers were joined by thousands of sympathizers and members of the labor unions as they marched from Colón square to the doors of the Industry Ministry along nearby Paseo de la Castellana on Wednesday. Among the newcomers were members of the 15-M protest movement, teachers protesting cuts in education, families and politicians. Also among the throng — which the CCOO and UGT labor union expected to be 25,000 strong, although no official figures were available — were what an Interior Ministry spokesman described as “anti-system groups, armed with bottle rockets and bricks.”
Spain tried playing poker vs ECB using peanuts, but the strategy failed. Bankia won’t be allowed to use ECB funding via the backdoor. The Peninsula Iberica is on fire. Some further insight via Macro Business.
The news from Europe was all Spanish overnight as the country continues to struggle to find traction on any plan that will lead it away from the need for external help:
Spain backtracked on a plan to use government debt instead of cash to bail out Bankia, as Prime Minister Mariano Rajoy struggles to shore up the nation’s lenders without overburdening public finances.
An Economy Ministry spokesman said yesterday that the government was considering using an injection of treasury debt instead of cash to recapitalize BFA-Bankia, as laid out in legislation approved in February. Spanish bond yields rose and investors criticized the idea, which the spokesman, speaking anonymously under ministry policy, said today had become a “marginal” option for the 19 billion-euro ($24 billion) rescue.
The government’s push to merge banks continues with the announcement that three savings banks, Ibercaja, Liberbank and Caja3, will vote shortly on whether to combine into a single entity. The merger, if approved, would create the country’ seventh largest financial institution with a combined £96bn in assets. Obviously we’ve seen this before with Bankia, which unfortunately didn’t go to plan.
The Trader has argued that the Greek mess will soon be spilling over to the Iberian Peninsula. As the Spaniards now start feeling the austerity pinch for real, and realize Zapatero & Co have not done a great job, this Sunday huge protests have taken place in many Spanish cities. There are reports of more than 500 000 people protesting in Madrid and Barcelona alone. Watch those Spanish spreads, as the country probably is the real elephant in the European room. People are angry. From El Pais;
The conservative government of Mariano Rajoy had its first taste of widespread social unrest on Sunday when hundreds of thousands of citizens took to the streets of major cities to protest far-reaching labor reforms.