Spanish stocks down on CajaSur rescue

Spanish banking shares have been hit today after Spanish bank, CajaSur, was bailed out at the weekend.

The Bank of Spain has taken over the running of CajaSur after a proposed merger between CajaSur and savings bank, Unicaja, collapsed at the end of last week.

CajaSur, which is one of Spain’s largest regional lenders, was heavily exposed to Spain’s property market crash.

It had some €2.2 billion worth of troubled loans, according to analysts.

The news sent shares falling today with Santander down 1.25% and lenders BBVA and Banco Popular also falling 2% and 1.3% respectively.

The euro was also hit and fell 0.6 cents against the dollar at $1.2512, and 0.8 cents down against the pound at €1.16040.

There are now concerns among investors about the stability of the Spanish banking sector.

In related news, last Friday, Spain’s Government passed the €15 billion (£13 billion) austerity plan, which has been implemented to deal with the country’s deficit, which is currently 11% of GDP.

Spain aims to reduce the deficit to 6% by 2011, which involves a 5% cut for civil servants.

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