An International Monetary Fund report scheduled to be published on Monday is likely to put the cost of refinancing troubled Spanish banks at around EUR 40 billion, reports said Thursday.
The report have outlined two scenarios. One estimate is based on the current situation in Spain where around EUR 40 billion will be needed to refinance a number of troubled lenders including Bankia.
Under the more pessimistic scenario, the economy is seen sliding into a deeper recession and would require a bailout of the entire banking sector at an estimated cost of around EUR 80 billion.
Fitch Ratings on Thursday downgraded Spain by three notches and said the fiscal cost of restructuring and recapitalising the Spanish banking sector is likely to be higher than expected.
Fitch estimates that the banking sector may need around EUR 60 billion or as high as EUR 100 billion in a more severe stress scenario.
On Thursday, the Spanish government led by Prime Minister Mariano Rajoy named technocrat Luis Maria Linde as the head of Bank of Spain, entrusting him with the task of cleaning up the entire banking sector. Linde will replace Miguel Angel Fernandez Ordonez, who resigned from the post one month ahead of scheduled amid heavy criticism over his handling of the banking crisis.
by RTT Staff Writer
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