Following a meeting held today on Wednesday, Spain's opposition leader Mariano Rajoy said that he agreed with Prime Minister Jose Luis Rodriguez Zapatero to speed the process of reform for the country's banking sector.
Rajoy told a news conference following the meeting with Zapatero We have reached two agreements, ... firstly, to facilitate the (banks') restructuring process and secondly ... to propose a reform of savings banks legislation.
Reaching an agreement with the opposition is a focal concern to Zapatero's ruling Socialists that rule with a minority in parliament. The key differences between the leaders and lack of political harmony has further tarnished the Spanish economy, as they failed to find common grounds on how to support the economy out of the brinks of recession.
Their agreement today on the banking front is a key pillar, especially that banking sector was hit hard by the crisis and the burst of the property bubble that fueled growth in Spain. Many banks are undercapitalized following the crisis and the promises have been slow in materialization and a relapse grows more threatening by the day as the economic conditions remain harsh with unemployment surging to 20%.
Though agreement on supporting the banking sector and further steps forward being made to reform is promising, just remains the last thing the market needs to hear. The focus is on the debt-lade nation that was pressured by surging borrowing costs and deteriorating finances outlook to be downgraded by Standard & Poor's.
Though Spain reiterated its ability to raise finance and meet its July redemption, speculation is working against the nation and the stacking negativity over Spain and Europe as a whole might be the role of the dice that forces Spain into default, especially as Germany signaled possibilities for such actions as the EU is not standing ready for another bailout.
Germany hinted the Europe should be granted the right of orderly default and that agitated the market and increased the bearishness on the euro in particular as the market awaits parliamentary confirmation on the grant to the bailout to Greece which is expected to be finalized sometime this week.