Ordonez, governor of Bank of Spain, states Banks can cover losses of developers.
The good new is that it is not just the spanish Ordoñez but also the European Banking Authority (EBA) who back that the Spanish financial sector has provisions for real estate risks of approximately 55,000 million of Euros, including the anti-crisis savings.
The mainstays of the system are healthy. There are problems with some finantial entities which are identified, limited and manageable.
The report of Bank of Spain focuses again on real estate exposure. Sovereign risk is not the enemy to fight in Spain. PP shares this vision.
It is the same vision Paul de Grauwe had bak in 1998 before the Euro was coming in ( you can read his wise, kind of prophetic announcement here)
At least, we know what the illness is and can find the right treatment, this is another good new.
See you in Spain,
Maria
Legal tip 540. Euro-fallacy and Spain´s current situation
26 May 2011 @ 10:35
I think of Paul de Grauwe´s statements made in 1998 and wonder what he thinks of current situation of Spain. I guess he thinks that Europeans need to complete the Spanish dream, as it is not a dream we spaniards had alone.
We dreamt together, let´s work together for it to be completed:
This is a very telling paragraph of De Grauwe´s thinking, written, as you know, back in 1998, before everything started:
Suppose a country, which we arbitrarily call Spain, experiences a boom which is stronger than in the rest of the euro-area. As a result of the boom, output and prices grow faster in Spain than in the other euro-countries. This also leads to a real estate boom and a general asset inflation in Spain. Since the ECB looks at euro-wide data, it cannot do anything to restrain the booming conditions in Spain. In fact the existence of a monetary union is likely to intensify the asset inflation in Spain. Unhindered by exchange risk vast amounts of capital are attracted from the rest of the euro-area. Spanish banks that still dominate the Spanish markets, are pulled into the game and increase their lending. They are driven by the high rates of return produced by ever increasing Spanish asset prices, and by the fact that in a monetary union, they can borrow funds at the same interest rate as banks in Germany, France etc. After the boom comes the bust. Asset prices collapse, creating a crisis in the Spanish banking system.
http://www.eyeonspain.com/blogs/costaluz/5546/legal-tip-527-on-europe-banks-and-spain.aspx
What do you think?
Cheers,
Maria