After Spain´s risk premium rose above 510 basis points and the country?s largest bank, Bankia, lost 30% during the first hour of trading yesterday, Spanish prime minister Mariano Rajoy made a point to make an appearance in front of the media. It was the first time that he has held a press conference alone since taking office last December. Of course, he spoke from the People´s Party headquarters instead of Moncloa, thus downplaying the governmental weight of a statement that was fully that.
Rajoy´s appearance was an attempt to quiet doubts about the financial system in Spain, but trying to minimize the effects of a widespread banking crisis had the opposite effect. Rajoy couldn?t persuade the markets. After his speach, the Ibex continued its fall and closed down 2.17%. The risk premium also continued to rise.
Rajoy chose to play down the importance of Bankia´s nationalization and, at the same time, insisted that this is not the first time that a bailout decision like this has been made to relieve a Spanish bank.
He said all that despite citing "the figures" provided by Bankia´s new management team, which call for a state-funded bailout of 23.5 billion euros. He insisted that, as for the government?s part, this will be a "year of transparency and decision-making."
"I don´t think the decision that was made about Bankia and the risk premium was for naught," Rajoy assured, evading the issue and attributing the situation on Greece troubles.
Rajoy is ignoring the fact that Spain´s struggling financial sector has been, more and more, the heaviest-hit in Europe. In fact, yesterday Rajoy emphasized as strong as ever that Europe should make "a strong, clear, energetic bet that clears up doubts about the future of the euro." The statement was interpreted as another call for the ECB to buy Spanish debt.
