Bankia bailout adds to Eurozone strains
28 May, 2012
More uncertainty is likely across financial markets, including currencies, this week, after Friday’s bailout by the Spanish government of Bankia, Spain’s fourth biggest lender.
Bankia, which has restated its 2011 accounts to show a €3bn loss instead of a €300m profit, asked for €19bn on Friday, which is the biggest bank bailout in history. As a result, the Spanish government could end up owning 90% of the bank, which is saddled with billions of Euros-worth of unsellable repossessed property and bad loans.
The Euro weakened slightly towards the end of last week, improving exchange rates for those of you sending money to the Eurozone. Since the UK economy is highly exposed to Europe, both for trading and banking, the Pound has however struggled to make much ground, despite the Spanish situation and the possibility of Greece leaving the Eurozone.
Conversely, as jitters in and around Europe continue, the US Dollar is fast becoming the world’s “safe haven” currency, and strengthening, giving worse rates for buying US Dollars. This may well continue in the coming weeks.
This week, there is very little official data of importance due out as we head towards the end of May, although at the end of the week we have US non-farm payrolls on Friday and Eurozone inflation on Thursday. Today is a bank holiday in the USA (Memorial Day) and Switzerland, France and Germany.
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