Spanish PM Rajoy has two important regional elections on October 21. Protests have been intensifying in Spain throughout the month of September. The people are beginning to resent their politicians who got them into this mess and the EU, which looks like it is trying to make it worse.
Rajoy needs to wait as long as possible before accepting any money and at least until it gets through those regional elections. If the country begins accepting bailouts, it will make the government appear weak at a crucial time.
By the way, €60bn is not going to be able to recapitalize Spain’s failing banks. Recall the subprime crisis of just a few years ago. Banks will always give very optimistic numbers, and their auditors will sign off on these.
Remember all of the numbers coming from the TBTF banks from 2007 to 2009? They progressively worsened even though the data for more accurate numbers existed the entire time. None of these companies nor their accomplices, the accounting firms, ever faced any penalties for cooking the books.
It should not surprise anyone that the same procedure continues, nor should it surprise anyone when the Spanish banks actually need several times more cash than is being reported today. Bad loans in these banks are €172 as of two weeks ago. Using the subprime crisis as a guide, we can safely double this figure and still be a few euro short of the final tab.