Burgeoning uncertainty about Spain's economic stability and the government's brinkmanship are precipitating fears of a prolonged recession in Europe, which are only compounded by concerns about a disorganized Greek exit from the eurozone.
The newest and most deadly symptom of the crisis was triggered by the government nationalization of one of the country’s biggest banks, Bankia, on May 9. A bedrock of the ruling conservative Popular Party, the bank reevaluated its 2011 results shortly after its seizure, and a tiny profit became a staggering black hole of nearly 24 billion euros.
Stockholders and investors cried fraud, but the government and Popular Party blocked attempts to investigate the Bankia meltdown. In fact, Spanish Central Bank Governor Miguel Angel Fernández resigned this week after the government gagged him when he tried to give his account to Parliament.
Yesterday the ECB scolded Spain for being opaque about an issue with such sweeping implications beyond its borders.
“When we are faced with dramatic recapitalization requirements, the reaction of governments is to underestimate the importance of the problem. This is the worst way to do things because in the end everyone ends up doing the right thing, but at the highest possible cost,” ECB governor Mario Draghi said.
He rejected Spanish pleas to inject money into Spanish banks, instead calling for an EU-wide financial agreement still under negotiation.