By Don Quijones, Spain & Mexico, editor at WOLF STREET
Since the financial sectors of Southern Europe and Ireland hit the rocks during the height of Europe’s sovereign debt crisis, many of their respective banks have grown dependent on the generosity of the ECB – a generosity that, as Greece recently learned to its great cost, has its limits.
In the last three years, the banks of Europe’s biggest bailed out economy, Spain, have received ultra-low interest loans from the ECB worth some €140 billion. To obtain that liquidity, the banks are required by law to deposit collateral with the ECB. However, Germany’s leading business and financial newspaper Handelsblatt now reveals that some Spanish banks have received special treatment from Spain’s central bank, the Banco de España, some of whose officials have shown no qualms about bending the rules: