Another Downpour In Spain

The rain in Spain is pretty much always a downpour these days as the economy and the housing market stubbornly fail to respond, at least so far, to almost any incentive.

One little-publicised side-effect of the latest dire announcement - the transfer of 35 billion euros into Spain’s bank rescue fund at the end of next week - is the scale of bank job losses that the EU insists as a quid pro quo.

Bankia is expected to lay off 6,000 of its 20,000 workforce and NovaGalicia Bank is to lay off 2,000 of its 5,800 employees: Reuters reports that Catalunya Caixa and Banco de Valencia, the other two nationalised lending banks, are currently being sold off with unspecified conditions imposed on buyers.

All four banks have been ordered, as one of many conditions of the bail out, to reduce their branch numbers by 50 per cent.

Meanwhile Spain’s so-called Group 2 banks - broadly speaking, smaller banks - will have their job losses and branch closures determined within the next three weeks.

This is more sad news in a country awash with it.

One measure of Spanish unemployment puts the national jobless figure at 25 per cent and there is an austerity programme of spending cuts of over six per cent of GDP to be achieved by the end of 2014. There is now a tax amnesty planned for some of the most serious evaders, while pension caps have been introduced for Spanish retirees.

What remains unknown (and therefore likely to have a serious detrimental effect on confidence) is what the latest bank contractions will mean for the housing market.

It is uncertain what effect will be had on bad property debts held by those and other banks, for the speed or willingness of banks to determine mortgage applications and whether there will be changes in conditions to existing property loans.

The pain in Spain continues.

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