Germany Said to Stall Spain on Bank Rescue

Moody’s says banks need nearly double the amount called for

An ATM for Bankia, a Spanish bank. (Photo: AP) An ATM for Bankia, a Spanish bank. (Photo: AP)

Just when it seems that Spain has made up its mind at last to ask for a bailout for its banks, Germany is said to be pushing Madrid to wait. To top it off, Moody’s Investors Service said that Spanish banks will need almost twice the amount of funding the country quantified just last week.

Reuters reported Tuesday that although some other eurozone countries are pressing Spain to ask for help from a new European Central Bank (ECB) bond-buying program, Germany is said by European officials to be urging delay. Madrid was said by European officials to have changed its stance on asking for funds for its banks, and to be prepared to request aid as early as this weekend, but Germany is stepping on the brakes.

Four different unidentified European officials have confirmed that Spain has come to terms with the idea of asking for help, with one saying in the report, "The Spanish were a bit hesitant but now they are ready to request aid."

However, Germany is not ready, according to several European diplomats and a senior German source who were cited in the report. The German source said that Chancellor Angela Merkel hoped not to have to bring bailout requests one at a time to a Parliament that has become increasingly hostile to the idea.

"It doesn't make sense to send looming decisions on Greece, Cyprus and possibly also Spain to the Bundestag one by one," the senior German source said. "Bundling these together makes sense, due to the substance and also politically."

A German government spokesman denied the idea that Germany was applying pressure on Spain to resist asking for help, and was quoted saying, "Every country decides for itself. Germany isn't pushing in one direction or the other."

Meanwhile, late Monday Bloomberg reported that, according to Moody’s, the capital shortfall at Spain’s banks could amount to 105 billion euros ($135 billion); that’s nearly double the figure Spanish officials released. Moody’s analysts said in a report that, to meet capital ratios required by 2011 legislation, banks would have to receive an additional 70–105 billion euros.

However, in a stress test commissioned by Spanish officials, banks were said to require only 53.7 billion euros. The stress test was conducted by conducted by the management consulting firm Oliver Wyman.

“The recapitalization amounts published by Spain are below what we estimate are needed for Spanish banks to maintain stability in our adverse and highly adverse scenarios,” said analysts Maria Jose Mori and Alberto Postigo in the report. “If market participants are skeptical about the stress test, negative sentiment could undercut the government’s efforts to fully restore confidence in the solvency of Spanish banks.”

 

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