The Spanish government’s fourth attempt in three years at cleaning up the billions of euros of troubled property assets held by its lenders failed to convince investors on Friday as bank shares fell sharply and Madrid’s borrowing costs rose again to beyond levels seen as sustainable.
Without certainty about the solvency of the banking sector, economic recovery is much more difficult,” Luis de Guindos, finance minister, said as he also announced measures to force lenders to split out their real estate-related loans into separate entities by the end of the year.
Shares in banks including Banco Santander, the eurozone’s largest by value, BBVA, and Banco Popular all fell as investors reacted to the news they would have to find the new provisions.
The priojected shortfall suggests Madrid would need to impose a further round of fierce austerity measures on its shrinking economy or face big Brussels fines for failing to tame its deficit.
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