Spain’s Economy Minister Luis De Guindos has sent a communique to Eurogroup Chairman Jean-Claude Juncker in which he says Spain’s banks will need a massive bailout — as much as 100 billion euros. Many Spanish financial firms have growing problems with their real estate loans, which have defaulted or are likely to as the housing market collapses and 25% unemployment destroys the market of buyers.
Most economists think that Spain’s central government will need a bailout itself because the country’s gross domestic product has dropped for two quarters and likely will for several more. The summit of European leaders starts later this week. Spain will be the focus of discussions about the region’s financial problems. And the debate between Germany and most other countries about austerity as the road to balanced national budgets will continue as it has for several months without conclusion. That will increase Spain’s jeopardy even more.
Douglas A. McIntyre