FEARS of further turbulence in the financial markets mounted yesterday as Spain was forced to bail out one of its biggest regional banks, adding to worries about the eurozone.
Spain’s central bank took operational control of Cajasur, one of 44 large regional lenders that account for about half the Spanish banking market. It will need an immediate cash injection of €500m (£430m).
The intervention has heightened concerns that Spain’s regional lenders could put added strain on its public finances. The collapse of the Spanish property market has left the regional banks with an estimated €300 billion bad-debt problem. Concern about Spain’s banks is one of the worries that have been hanging over the eurozone in recent weeks.
Spain cuts 2011 growth forecast as austerity bites
(AP) – 1 day ago
MADRID — Spain says cutbacks aimed at reigning in its deficit will hurt economic growth in 2011, which it now expects to be half a percentage point lower than previously forecast.
Finance Minister Elena Salgado says the government now expects economic growth for next year to be 1.3 percent, down from the previous prediction of 1.8 percent.
Salgado says the ministry was maintaining its prediction of a 0.3 percent contraction for 2010.
She announced the forecast changes late Thursday after the government approved public sector wage reductions as part of a bid to save euro15.25 billion ($18.81 billion) over two years and help reduce the nation's deficit.