Climate of fear: Government official denies rumor of a run on Spanish bank

May 17, 2012 – SPAIN – A €1billion run on a recently nationalized Spanish bank has sparked further fears that the 17-nation eurozone is about to implode. European markets fell as fears of a continent-wide contagion from government-less Greece’s economic crisis also spread. Shares in Bankia, Spain’s fourth biggest bank formed in 2010. It added to losses incurred yesterday after the European Central Bank said it had stopped providing liquidity to some Greek banks because they had not been successfully recapitalized. Greece is set to hold fresh elections on June 17 after voters rejected austerity measures imposed on it by the European Union and the International Monetary Fund, which has heightened fears it will have to leave the eurozone. Investors are also worried by the possibility of contagion from a Greek exit from the euro spreading to other countries such as Spain or Italy. ‘It’s not Greece leaving the euro that is the major issue, it’s the domino effect,’ said John Bearman, chief investment officer at British firm Thomas Miller Investment, which manages roughly €3billion worth of assets. Greece today held a swearing-in ceremony of Coalition of the Radical Left party leader Alexis Tsipras and former Prime Minister George Papandreou. But their leadership will be short-lived, as their parliament will be dissolved tomorrow so they can arrange new elections. Concerns over Spain were highlighted by data showing the country had slipped back into recession during the first quarter, while the country’s medium-term borrowing costs rose sharply during a bond auction. Tensions within the European banking system were also exposed by the fact that key eurozone three-month bank-to-bank lending rates had edged higher today for the first time since the European Central Bank pumped in ultra-cheap, three-year funds in December.  –Daily Mail 

Bank run denied: Spain’s Economy Secretary said on Thursday there had not been an exit of deposit funds from troubled bank Bankia. “It’s not true that there is an exit of deposits at this moment from Bankia,” said Economy Secretary Fernando Jimenez Latorre. El Mundo newspaper earlier reported that Bankia had lost over 1 billion euros ($1.27 billion) in deposits, around 1 percent of retail and corporate accounts, over the past week. –Reuters

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