European Officials Meet Monday October 8 To Mull Aid To Spain As Depositors Storm Spanish Banks

Monday, October 08, 2012 07:57
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European Officials Meet Monday October 8 To Mull Aid To Spain As Depositors Storm Spanish Banks

Tags: European crisis | European zone | world economy

Officials in Europe are scheduled to meet on October 8 to discuss closer banking regulation and Spain’s efforts at overhauling its fiscal infrastructure.

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A month after European Central Bank’s Mario Draghi promised open-ended bond purchases to help distressed Eurozone member countries, new worries are surfacing that Spain may wait too long to ask for aid.
 
A condition for receiving aid is that Spain must ask for it. Political pressures on Spain’s Prime Minister Mariano Rajoy have kept him from doing so.
 
Meanwhile, depositors have been storming Spanish banks, demanding to be refunded the investments they made in high-yielding preferred bank shares and subordinated bonds, saying the banks swindled them.
 
They claim bankers said the securities were just as safe as deposits. Some small community bankers have been beaten and their car tires have been slashed.
 
The mounting pressure by depositors is adding to the erosion of overall investor confidence in Spanish banks.
 
European officials have yet to come up with a plan setting up rescue conditions and centralized bank supervision. Countries who ask for aid will have to go through the current bailout mechanisms that require stringent austerity measures as a condition for receiving funds.
 
The European Stability Mechanism (ESM) will then buy bonds alongside the ECB. Fears are that an ESM program will be put together too quickly and will do more harm than good.
 
Meanwhile, German Chancellor Angela Merkel will visit Greece for the first time since 2009. The visit underscores her shift in support of Greece staying in the euro and may even yield a statement of praise for Greece’s efforts to rein in its budget.

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