Spain's central bank will bail out struggling regional savings bank Caja de Ahorros Castilla La Mancha, marking the first time a Spanish financial institution has been rescued since the current financial crisis began, The Wall Street Journal reported. The Spanish government said on Sunday that the Bank of Spain will take over management of the troubled lender, known as CCM, and inject liquidity to keep it afloat, backed by government loan guarantees of up to €9 billion ($12 billion).
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Spain's publicly traded banks have weathered the financial storm remarkably well thus far--but that's only half the story. Around 48% of Spain's lending business is in the hands of cajas de ahorro, unlisted savings banks largely controlled by the country's regional governments. Amid the collapse in the Spanish construction sector and an ensuing jump in delinquent loans, many of these are in trouble. The industry body that represents them is calling on the government to take urgent action or face "dramatic consequences." The Spanish government hasn't yet responded.
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The European Central Bank is struggling to keep up with the region’s plunging economy, Bloomberg reported. Even as President Jean-Claude Trichet and his colleagues prepare to cut interest rates to a record low today, the 16 nations that share the euro are mired in a recession deeper than envisioned in their worst-case scenario just three months ago. The pain is building as companies including chemical-maker BASF SE cut investment and jobs, Spain and Ireland run an increasing risk of default and trade partners to the east crumble.
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Hayman Advisors LP, the firm that earned $500 million betting on the U.S. subprime mortgage-market collapse, says Europe’s monetary union is about to fall apart, Bloomberg reported. Richard Howard, a managing director for global markets at Dallas-based Hayman, said Germany may opt to shore up its own economy, Europe’s biggest, rather than bail out fellow euro nations such as Austria, Italy and Spain as their banks sag under the weight of bad debts. That might lead to defaults and compel Germany to renounce the euro, he said.
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Spain’s economy shrank by the most in more than 15 years in the fourth quarter, as what may be the worst recession in half a century pushed the unemployment rate to the highest in Europe, Bloomberg reported. The economy contracted 1 percent from the previous three months, the National Statistics Institute said Wednesday, compared with a median forecast of 1.1 percent in a Bloomberg News survey. The economy entered its first recession since 1993 after shrinking a revised 0.3 percent in the third quarter. From a year earlier the economy contracted 0.7 percent.
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Spanish industrial production fell by almost a fifth during December, the largest decline on record, and data showed debt defaults soaring as the global crisis tipped Spain into deep recession. The 19.6 percent slump in output at Spain's credit-starved factories and businesses dwarfed slowdowns in other major European economies. A separate data release on Thursday from the National Statistics Institute showed 1,082 Spanish firms filed for bankruptcy protection between October and December, almost four times as many as in the same period of 2007.
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The number of registered unemployed people in Spain swelled by nearly 200,000 in January, the fastest monthly increase in more than a decade, as companies struggling with declining sales and liquidity problems laid off workers or declared bankruptcy, the International Herald Tribune reported. The Labor Ministry said Tuesday that the number of people out of work rose to 3.33 million, a 6.4 percent increase over December and a jump of 47 percent since January 2008.
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Banco Santander SA’s €1.38 billion ($1.8 billion) offer to compensate clients hit by Bernard Madoff’s alleged fraud may leave them with preferred shares they can’t trade and that the bank might not buy back, Bloomberg reported. That’s a risk Santander clients will have to weigh along with the strings attached to the offer of stock paying a 2 percent annual yield. They include foregoing any legal action and keeping Spain’s biggest lender as their “preferred” bank as long as the shares stay in circulation, which may be indefinitely, according to a proposal seen by Bloomberg News.
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Some Spanish television companies are facing bankruptcy and the government should not slash advertising prices for state-owned channels, Spanish media group Telecinco's chief executive said in an interview published on El Mundo's website on Monday. "The television sector....is facing bankruptcy and all the alarm bells are ringing," Paolo Vasile was cited as saying. Telecinco has been hit by Spain's sharp economic slowdown, which has meant advertisers are cutting budgets.
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A creditor of Spain's Nozar has asked a judge to put the privately held property company into administration, court documents showed on Tuesday, a move that would lead to Spain's second biggest corporate default, Reuters reported. Last year creditor Avalatransa twice asked the courts to put Nozar into administration over unpaid debts, which in total exceed 4 billion euros, but both attempts were unsuccessful. Nozar, owned by the Nozaleda family, has five days to respond to Avalatransa's filing.
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