The dictionary gives various accepted definitions for timing: rhythm, opportunity, coordination. What is happening with Bankia and financial reforms in Spain reveals a complete lack of timing on behalf of the Spanish government, the Spanish central bank, those in charge of financial institutions, the CNMV (Spain's stock market regulator) and all actors implicated in this issue in one form or another. Opportunity and coordination have faltered, too.
On Tuesday it leaked out that the government pushed Rodrigo Rato to resign from Bankia, so it is inexplicable that someone in the national government would think resolving the issue could wait until Friday. The economist Juergen Donges said yesterday in this periodical that "financial matters like this are not discussed in public." As was expected, the repercussions have been severe. Yesterday the Spanish stock market closed at its lowest level since October 2003 and the risk premium spiked to 456 points.
Yesterday morning Bankia's advisors met to name José Ignacio Goirigolzarri as the firm's new CEO, and in the afternoon advisors from Banco Financiero y de Ahorro (BFA) met in Bankia's head office to decide on nationalizing 95% of its capital and, therefore, also nationalizing its 45% stake in Bankia. Despite these serious circumstances, a clear explanation has yet to be provided. The circumstances have scared Bankia's 10 million clients and its 400,000 shareholders. The Government's communication policy is is failing miserably, and Rajoy seems to have washed his hands of the issue.
Rajoy hasn't said much. "New leadership will evaluate the situation and will adopt measures that they see fit," he said. "The decision will be made on Friday, and the Minister of the Economy Luis de Guindos is not going to give out information on this issue to the public either."
As far as the Bank of Spain, which will probably take the reigns of the situation, it's not saying much either. The Bank of Spain's governor, Miguel Ángel Fernández Ordóñez, ought to seriously consider stepping down and not prolonging the agony. The CNMV could have suspended Bankia's stock trading in light of widespread uncertainty about the bank, but it looks like the regulator chose to give investors a chance to sell at a loss in favor of general market interest and transparency.
We should not lose sight of the fact tha tduring all this time, the biggest bankers have only looked out for their own interests and were never in favor of a bad bank because they were not ready to have their balance sheets undressed in public. So they pressured the government to stall creating a bad bank, despite this self-interested pressure delaying a sector-wide clean up and blocking the road to recovery.
The Spanish economy is going through an extremely troubled time. The economic and political environment is not favorable, especially since it is more than likely that Greece will abandon the euro. The government cannot be denied its intent to reform the country, which is reflected in several important measures that it has already taken. Still, the population is disappointed at the government's failure to explain what happened this time, avoidance of presenting a clear roadmap to recovery and a financial reform calendar. In short, it looks like the government has no plan, but sure can improvise.
All these doubts aren't helping Spanish citizens face the sacrifices they are being asked to make in order for their country to carry out reforms. Announcing every Friday that measures will be taken may strike fear in people's hearts, but it doesn't win them over. The Spanish government needs to make its plan public, say what kind of bad bank it will create, what new conditions it will impose on the sector, how all this will affect clients and shareholders. Still, we can still regain our timing and finish financial reforms once and for all before our time expires in June.
