Thursday, 21 February 2008

Spain rejected on Thursday as damaging an opposition claim that the central bank is concealing problems faced by the country's banks in the wake of the global credit crunch.Eduardo Zaplana, third ranked in Spain's opposition conservative Popular Party (PP), said on Wednesday some banks and savings banks faced liquidity problems and Spanish authorities were not telling Spaniards the truth.
"I believe they have difficulties, without doubt," Zaplana told Spanish national television in an interview, when asked if banks and savings banks faced problems.
Bank of Spain and government officials have repeatedly said the banking system is solvent due to strong reserves and a default rate that is among the lowest in Europe.
Economy Minister Pedro Solbes on Thursday told journalists Zaplana's comments showed "... irresponsibility, and a total lack of knowledge that does enormous damage to the Spanish financial system."Such assurances follow a string of analysts' reports forecasting problems at Spanish savings banks, or cajas, due to exposure to real estate and mortgage debt at the end of a housing boom and because of an economic slowdown.A sharp rise in unemployment and inflation has narrowed Spanish Prime Minister Jose Luis Rodriguez Zapatero's lead over the PP to between 1.5 and 5 percentage points in recent polls.Opposition leader Mariano Rajoy says the government has not prepared Spain for the end of its property boom and is hiding the country's vulnerability to tightening credit conditions.



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