You know things are getting worse with Spain’s economy when Santander, Spain’s biggest bank, has said the government must ask for an international bailout and soon. The Spanish bank is finding it incredibly difficult to reduce borrowing costs for lenders as the writeoffs its had on bad property investment all but eliminated its third-quarter profits.
Last year during the same time period, Santander had profits of 1.8 billion euros. This year? Only 100 million. Just as worrying for the bank is the increase in bad loans they are seeing with Spanish customers, up to 6.38 percent from 5.98 only three months ago. Not too surprising really, though, as it was just announced the Spanish unemployment rate is now over 25 percent. When people lose their jobs they can’t afford to pay back a loan or a mortgage. That’s just common sense.
Spanish prime minister Mariano Rajoy meanwhile is resisting acting on calls for a bailout but how much longer can that continue?
As one leading economist said yesterday, Spain cannot continue to pay out the record number of unemployment payments it’s having to pay — it’s going to bankrupt the country – so something has to be done to stimulate the economy and create jobs. Some think a bailout may do just that.
As for Spain’s other banks, an independent auditor recently said Spanish banks are going to require an injection of at least 59.3bn euros if they’re going to be able to survive.
Santander, currently at least, is one of the few Spanish banks that not only doesn’t need money from a bailout but actually looks quite financially stable. However, if other banks can’t get the help they need, they are eventually going to drag Santander down with them. Thus the bank’s call for a bailout from the EU rescue fund.