Spain

Spain’s government and its banks are discussing a new scheme to segregate problematic property loans into one or more asset management companies to relieve the burden on struggling lenders, according to officials and bankers, the Financial Times reported. The “bad bank” scheme is the latest attempt by the centre-right government of Mariano Rajoy, prime minister, to avoid an international rescue programme of the sort required by Greece, Ireland and Portugal.

Spanish officials moved to shore up confidence in the ailing local economy after new data showed unemployment at an 18-year high, after credit-ratings firm Standard & Poor's slapped Spanish government debt with a two-notch downgrade, The Wall Street Journal reported. Spain's statistics bureau Friday said the country's jobless rate rose to 24.4% in the first quarter, from 22.9% in the fourth quarter of last year, inching toward its highest level on record. More than half of workers under 25 years old were without jobs.

A YPF bond due in July next year is likely to default, and while Repsol YPF SA should escape a similar fate, this prospect could be yet another headache for the Spanish company after YPF's operations were seized by Argentina's government last week. Analysts expect that YPF's nationalization will almost certainly lead to a default on its bonds. Argentina's proposal to take over 51% of YPF would cut Repsol' stake to just 6% from 57% currently. Repsol, which denounced the takeover, has vowed to take the dispute to court.

Spain in recent days has taken center stage in the euro crisis, Spiegel Online reported. The country's banks are threatened with collapse and the government in Madrid has not been successful in efforts to get the national budget under control. Will the country be forced to request aid from the euro bailout fund? Spain's banks are widely regarded as time bombs, with portfolios of volatile loans on their balance sheets that could explode at any time. The country is sliding deeper into recession and international financial investors are slowly but surely withdrawing.

Spanish banks may need to set aside more money to cover exposure to a bust property market because they still have to recognise billions of euros in loans to non-viable companies, said a report by Spanish property consultancy RR de Acuna. Spain has ordered its battered banking sector to reinforce balance sheets as a correction in the housing market continues and the central bank forecasts lenders will need some 53.8 billion euros ($70.7 billion) to cushion against bad debt. But Thursday's report said that may not be enough. "Banks are not recognising all of their risk.

Spain’s surging bad loans are spurring doubt on whether the government can persuade investors that it can clean up the country’s banks without further damaging public finances, Bloomberg reported. Non-performing loans as a proportion of total lending jumped to 7.91 percent in January, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data. The regulator is set to publish data for February today.

President Cristina Kirchner, in a move that marks a watershed in expanding the state's grip on the economy, said she will send a bill to Congress to nationalize Argentina's largest oil-and-gas company, YPF SA, The Wall Street Journal reported. The move fired up a battle with the company's Spanish controlling shareholder and the Madrid government. Under the proposal, which declares the petroleum industry of "national public interest," Argentina's federal and provincial governments would take 51% of the company, now majority owned by Repsol YPF SA of Spain.

Spanish debt risk climbed to a record for a second day and signalled a 37 percent chance the nation will default as its borrowing costs surged to levels that prompted its neighbors to seek bailouts, Bloomberg reported. Spain is due to sell new debt Tuesday before European officials travel to Washington later this week to seek a bigger war chest to battle the financial crisis. The nation’s 10-year bond yield soared to 6.15 percent, the highest since Dec. 1 and approaching the 7 percent level that foresaw the international rescues of Greece, Ireland and Portugal.

Video games retailer Game Group's Spanish operations have been bought out of administration by investment firm OpCapita, with an eye to eventually selling them on, OpCapita said on Friday, Reuters reported. The private equity firm, owner of British electrical goods retailer Comet, has already bought the larger British operations of Game out of administration.

Spain's central government will be able to intervene within nine months in the finances of autonomous regions that do not comply with strict deficit reduction rules under a fiscal stability law passed by the lower house of Parliament on Thursday, Reuters reported. Prime Minister Mariano Rajoy, of the centre-right Popular Party, hopes the law will help persuade investors and Spain's European partners that the country can crack down on overspending in Spain's 17 autonomous regions. The bill now goes to the Senate, where it is expected to pass.