Author: Biz India

By Tim Lister, CNN May 31, 2012 http://www.cnn.com/2012/05/31/world/europe/spain-eurozone-threat/index.html   If Greece was the focus of markets’ angst last week, attention this week has shifted to the other end of the Mediterranean. Spain’s public finances are nothing like as grim as the Greeks’, but a worsening banking crisis threatens to deepen an already painful recession and endanger the future of the eurozone. The immediate cause of the pain in Spain is the need to recapitalize the country’s fourth- largest bank, Bankia — itself an unwieldy amalgam of previously-ailing financial institutions. The bank asked the government for the not inconsiderable sum of €19 billion ($23.5 billion) last week. The state has already pumped some €20 billion into a banking system crippled by bad debt — much of it property-related. Getting the Spanish banking system out of intensive care threatens to become a vicious circle. To provide further help, the government will have to issue yet more bonds – worsening its own finances. The yield on Spain’s sovereign 10-year bond has risen to nearly 7%, widely regarded by international markets as unsustainable. Portugal, Greece and Ireland had to seek international bailouts when their borrowing costs reached such levels. Is Spain too big to fail? For the eurozone countries, the situation in Spain is far more daunting than that in Greece. According to some analysts, while it may be deemed “too big to...