Spanish banks' ECB borrowing soars

14th December 2011, Comments 0 comments

Spanish banks borrowed sharply higher amounts of money from the European Central Bank in November, authorities said Wednesday, a sign Spain is struggling to raise money on the financial markets.

The amount owed by Spanish banks to the European institution jumped 28.8 percent compared to October to 97.97 billion euros ($127.6 billion), Spain's central bank said in a statement.

This key measure of Spanish banks' ability to finance themselves via the markets hit a peak in July 2010 then fell for months, indicating stronger investor confidence.

Their borrowings fell from a record 131.89 billion euros in July 2010 to 42.23 billion euros in April this year but started to rise again in September in a sign that confidence in the Spanish banks was weakening.

European Commission economists have warned that Spain risks falling back into recession next year after emerging in 2010 from one brought on by the bursting of a real estate bubble and the wider world economic crisis.

Investors have grown increasingly anxious in recent months that financial turbulence in heavily indebted Greece and Italy could spread to Spain, which is fighting to lower its public deficit.

In August, the European Central Bank relaunched its programme of buying the debt of eurozone countries including Spain in a bid to reassure investors and ease the government's borrowing costs. It has resisted widespread calls to buy up government bonds on a larger scale.

© 2011 AFP

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