Spain seeks €100bn bailout for its banks

A mere seven months after winning a landslide victory, Spain’s Prime Minister was forced to abandon his bid to recapitalise Spanish banks without seeking external help as a deepening recession forced lenders to recognise increasing losses.

Spain asked eurozone governments for a bailout worth up to €100 billion to rescue its banking system as it became the biggest euro economy so far to seek international aid.

Spain is the fourth bailed-out country in the eurozone, joining Greece, Ireland and Portugal. Spain’s bail­out move means it has a firewall in case Sunday’s election in Greece causes market turmoil.

In the eurozone, Eurostat data shows that EU industrial production fell 0.8% month-to-month in April, the steepest fall in four months, after a 0.1% decline in March. The year-on-year decline is 2.3%. The largest drops were in Portugal, Italy and notably, Germany, with a 2% decline on the month. Overall industrial output in the 17-nation eurozone is now at its weakest since September 2010.

In the UK, data published by the Office for National Statistics shows that factory output fell 0.7% in April from March. This decline was led by pharmaceuticals, aircraft maintenance and food and drink production. According to a forecast by a Bloomberg News survey, economists were expecting a 0.1% decline.

Overall industrial output was unchanged on the month, weaker than the 0.1% increase forecast by economists. These data point to the UK economy’s continued weakness.

In the US, a 0.2% fall in retail sales in May matched April’s drop that was previously reported as a gain.

This prompted economists to cut forecasts for economic growth as limited job and income gains hold back consumers. May’s drop in retail sales matched the median forecast of economists surveyed by Bloom­berg News. This increases the case for another round of stimulus.

This article was compiled by Bank of Valletta for general information purposes only.