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While his country sinks, Spanish prime minister threatens Latin America.

Mariano Rajoy says that the nationalization of YPF could affect the entire continent; meanwhile, the Madrid stock exchange plummets following a report pointing to record defaults in Spanish banks.

While his country sinks, Spanish prime minister threatens Latin America (Photo: REUTERS)

247 - The Spanish are currently experiencing an acute problem of perception of reality. Yesterday, when Argentina announced its plan to re-nationalize the oil company YPF, regaining control currently held by the Spanish company Repsol, the government of Prime Minister Mariano Rajoy promised retaliation and said that the Argentine decision will have impacts throughout Latin America.

However, it is Spain itself that is sinking. This morning, the Madrid stock exchange index was plummeting. It fell 3,5 points, accumulating a devaluation of almost 30% for the year. The reason: Spanish banks have never had as many bad loans as they do now. The default rate, which was below 1% in 2007, hit 8,16% – the highest rate since 1994.

The data is part of a report from the Bank of Spain, the Spanish central bank, released this Wednesday. In total, the non-performing loans of the country's financial institutions, tainted by the largest real estate bubble in Europe, amount to 143 billion euros, according to the report.

This situation has fueled rumors that Santander bank in Brazil could be bought by either Banco do Brasil or Bradesco. To be confirmed.