Catalonia Chaos Begins to Squeeze Spain’s Financial Markets

Bank shares plunge. Money is already on the move.

Spain’s biggest political crisis of a generation, which has led to the complete breakdown of communication and understanding between its government in Madrid and the separatist region of Catalonia, is finally beginning to take its toll on the country’s financial markets.

Spain’s benchmark index, the Ibex 35, slumped nearly 3% following its worst day of trading since the Brexit vote last June. Spain’s 10-year risk premium — the differential between the yield on its 10-year bonds and the yield on Germany’s 10-year bonds — soared to 129 basis points. And that’s despite the fact that the ECB continues to buy Spanish debt hand over fist.

But it is the banks that have borne the brunt of the pain this week. On Monday, the first trading day after the independence referendum, they lost €4.84 billion in market value. Over the past five trading days, shares of the two biggest Catalan-based banks, Caixabank and Banco de Sabadell, have plunged respectively, 9% and 13%.

So tense is the situation that the CEOs of each bank felt compelled to release a statement today reassuring customers that they have all the means and tools necessary to protect their interests. Their contingency plans include the option of abandoning their base of operations in Catalonia and moving elsewhere — to Madrid in the case of Sabadell and Mallorca in the case of Caixabank.

But it wasn’t just Catalan banks that were caught up in today’s rout. Important Spanish banks with somewhat less exposure to Catalonia also saw their shares plunge

Continue reading the article

One thought on “Catalonia Chaos Begins to Squeeze Spain’s Financial Markets

  1. I wonder if anyone is paying attention, other than the puppet masters and a few of the peasants. The Spanish situation is, perhaps, 1936 2.0, with another dictator who wants the populace to be good little sheep. As for the rest of Europe, 1938 or 1939 during the “Phony War” just before the outbreak of hostilities.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s