Banks fear being made scapegoats for the crisis.
To receive aid that could reach 100 billion euros, Spanish institutions will have to cut perks and dividends for shareholders; Santander, owned by Emilio Botín, which has a strong presence in Brazil, may initially be able to resolve its problems without resorting to external aid; GDP could fall by 4,1%.
247 - As soon as the largest bailout of all time was announced, which could reach 100 billion euros in the Spanish case, the European press began to detail the conditions of the package, which are still not entirely clear. According to the newspaper El Pais, the bailout helps to avoid a bank run, guaranteeing deposits. However, for investors, it should lead to lower dividends and, for banks that resort to the credit lines, the counterpart should be cost reductions and cuts in perks for executives.
From the perspective of Spanish citizens, however much the authorities deny the need for greater fiscal austerity, that is not what is expected. As the package increases Spain's public debt, further tax increases and cuts to social benefits are anticipated. For this very reason, bankers fear being singled out as scapegoats for the crisis.
Scenarios outlined by the International Monetary Fund point to a risk of social upheaval in Spain. In the worst-case scenario, Spanish GDP will shrink by 4,1% this year and a further 1,6% next year, further deflating the housing bubble – in this scenario, house and apartment prices would fall by another 30%, increasing losses for the financial sector due to mortgages. In a country where unemployment is already at 24%, this scenario would bring social upheaval and accentuate the crisis of political legitimacy – Prime Minister Mariano Rajoy, of the right-wing PP party, was elected on a promise to reduce the cost of living in Spain, create jobs, and avoid a bailout, a word he avoids at all costs.
The Santander case
In the scenario outlined by the IMF, only the three largest Spanish banks, BBVA, Santander, and La Caixa, would weather the crisis without resorting to the bailout package. The fourth largest, Bankia, which was headed by a former IMF chief, Rodrigo de Rato, has already been nationalized.
This does not mean, however, that these banks do not need to raise capital. Santander, for example, tried to sell 10% of its shares to Banco do Brasil, but the offer was rejected by President Dilma Rousseff.
In Brazil, the situation at Santander is of particular interest, since it is the third largest private bank, behind only Bradesco and Itaú Unibanco, and there are fears that the European crisis could eventually spread here.
For now, the trend is that the lines of credit from the rescue package will be accessed by banks such as Kutxabank, Sabadell, Popular and Bakinter, which are not part of the leading Spanish group.