With the issue of Greek aid nearing resolution attention can turn once again to other struggling Eurozone nations.
Throughout these last weeks of indecisive discussions regarding Greek debt reduction struggling Spain has taken a back seat but after Eurozone finance ministers reached an accord the latter nation has reappeared in the headlines.
The European Commission has today approved plans for a radical overhaul of the Spanish banking system, meaning that the Eurozone is now free to distribute the up to 100 billion Euros granted to Spain from the permanent ESM bailout fund.
The overhaul is the most extreme ordered by the Commission since the financial crisis struck five years ago, involving significant job cuts in Spain’s four nationalised banks (Banco de Valencia, Catalunya Banc, Bankia and NCG Banco) and will leave bondholders nursing heavy losses.
Banco de Valencia will be sold to Caixabank, one of the healthiest lenders in Spain. The three larger banks will then have to spend the next five years slashing their balance sheets by over 60 per cent.
European Union Competition Commissioner Joaquin Almunia commented on the move: ‘Our objective is to restore the viability of banks receiving aid so that they are able to function without public support in the future.’
Almunia also noted that selling Banco de Valencia under a loss protection scheme was the most financially viable option and that Catalunya Banc and NCG Banco would be sold or liquidated by 2018.
As many as half of the branches belonging to the banks will have to close in the years ahead with Bankia alone intending to lay off around 6,000 staff members in order to return to profitability next year.
Although such large job losses are the last thing Spain needs given its current levels of unemployment the Commission did assert that the banks would be prevented from using more taxpayer’s money than absolutely necessary in the future.
As of 14:15 am
The Pound to Euro exchange rate is currently trading at 1.2389
The Pound to US Dollar exchange rate is currently trading at 1.5969
The Pound to Australian Dollar exchange rate is currently trading at 1.5302
The Euro to US Dollar exchange rate is currently trading at 1.2889
The Euro to Pound exchange rate is currently trading at 0.8071
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