Spanish alarmed at the state of their country’s economy and banking system are taking their money out of the failing county while they still can.
The country is heading closer and closer to needing a bailout from the European central bank and fears have continued to persist that the country is in line to be the next Greece. Some observers are even suggesting that Spain could be forced to leave the Euro faster than the Greeks to limit the dire consequences that a Spanish financial crash will have on the global financial system.
Many Spaniards are terrified about the state of their banks, which have been battered by a succession of disasters. First was the 2008 property crash now they face spiraling debts. To avoid financial ruin many Spaniards are sending their money to accounts abroad or to stronger economies in Northern Europe in the hope that their cash will be safe.
The concern that Spain cannot support its banking system has caused shares to plummet and has weakened the Euro.
“What we need first of all is for the Spanish government to tell us its restructuring plans for Bankia, what options it is considering,” said European Commission spokesman Amadeu Altafaj.”From there, we will study the plans and see whether they comply with requirements for public aid. Spain should carry out the refinancing of its banking sector, laid low by a decade of unsustainable lending during a property boom, by market mechanisms or government funds, rather than a European rescue which would have negative connotations the sooner uncertainties are removed the better,” he added.
Bank of Spain data shows that over 66.2 billion Euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.
The worsening situation in Spain is being exacerbated by the uncertainty of election results in Greece and of the referendum in Ireland. All of these issues are dragging at the Euro which is close to a 22month low against the dollar. It saw a slight increase thanks to rumours circulating that the European central bank (ECB) is planning to announce strategies to battle the debt crisis at its conference next week.
Due to the track record of the European Union, European Commission and ECB leaders it is expected that once more ineffective strategies will be discussed and not implemented, but you never know a miracle might happen.
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