Rajoy looking to peers for the ‘formula’

Spanish prime minister Mariano Rajoy
Spanish prime minister Mariano Rajoy

Spanish Prime Minister Mariano Rajoy said he’s talking to his European peers about how to save the country’s struggling banking sector.

The prime minister said he has spoken to other European leaders and colleagues in the European Union to try to find “the formula for the financing of the capitalization of the banking sector”.

He told reporters that he will take the decision that “best defends the interests of Spaniards.”

The comments came just before ratings agency Fitch downgraded the country’s credit rating to ‘BBB’, and ratings and research agency Standard & Poor’s forecast Spanish banks are likely to recognise losses of between 80 and 112 billion euros by the end of 2013 as the country’s double-dip recession forces more borrowers into default.

Pressure is building on Spanish banks to make loan-loss provisions this year for both 2012 and 2013.

Spain is trying to overcome opposition from Germany to allow the euro region’s bailout fund to funnel capital directly to lenders avoiding an official international bailout. The treasury are seeing their access to capital markets reduced as it increasingly depends on domestic banks to buy its bonds.

Yesterday Spain’s 10-year bond yields rose to 6.237, heading back toward the 7% mark that triggered bailouts in Greece, Ireland and Portugal. The treasury met its issuance goal selling 2.07 billion euros of securities, surpassing the target of 2 billion euros.