Monday 22 January 2018

Bank of Spain governor resigns amid criticism

Struggling economy hit with further blow as retail sales figures show 9.8pc year-on-year decline

BANK of Spain governor Miguel Angel Fernandez Ordonez said he will leave his job a month before his term ends amid criticism of his handling of the country's banking crisis.

Mr Ordonez tendered his resignation to prime minister Mariano Rajoy yesterday, the Madrid-based Bank of Spain said.

The governor has faced criticism since the May 9 nationalisation of Bankia, Spain's third-biggest lender.

Bankia, which received €4.5bn of public funds in 2010 in Spain's first attempt to clean up the banking industry, asked for another €19bn last week.

Criticism of Mr Ordonez has come from the People's Party government, opposition parties and the bank's inspectors.

Responsible

Jaime Garcia-Legaz, deputy minister for trade, said this week that Mr Ordonez was responsible for what had happened in Bankia. Bank of Spain inspectors called for his resignation in a letter to the prime minister two weeks ago.

The sinking Spanish economy was struck another blow yesterday with retail sales figures for April showing a 9.8pc year-on-year fall, the biggest since records began in 2003.

This was the 22nd month in a row that Spanish retail sales have fallen. The public are battening down their hatches as the centre-right government seeks to impose the most brutal round of austerity seen in Spain since the Franco era.

Spain, under orders from the European Commission, is looking to reduce budget deficit from 8.9pc of GDP to 5.3pc by the end of this year.

The economy has already succumbed to recession and the OECD last week forecast that it would sink 1.6pc over the course of 2012. Nationwide unemployment has reached 24pc and half of young people are jobless.

But an even more immediate crisis is the state of its financial sector, which is groaning under bad loans made to the country's collapsed real-estate industry.

An independent audit of the sector is under way and will report next month on how much extra capital the banks need to stay afloat.

But many analysts wonder if Spain has the resources to rescue its lenders.

Many investors think Spain will soon be forced to apply for a bailout from the eurozone rescue fund. But this is something it has been resisting, since a bailout would entail the same kind of intrusive external supervision seen in Greece, Portugal and Ireland.

Madrid would prefer to maintain some of its autonomy by negotiating a direct bailout of its banks by the European authorities.

Investors, however, are dumping Spanish sovereign debt in anticipation of a bailout that they fear may leave them at risk of a "haircut", as seen in Greece.

Irish Independent

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