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Time 'running out for Spain'

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Time running out for Spain

Policymakers in Spain have been warned there is not much time left in which to ask for financial support.

The European country has been reluctant to request a bailout for some time, despite its precarious fiscal position and the uncertainty this is creating on the markets.

As a result, Schroders has insisted "time is running out for Spain", as the level of deposits in its banks is starting to fall.

Keith Wade, chief economist at the group, said this is exactly what happened to Greece before it needed to be bailed out.

"People in Greece began to believe they might not be a member of the euro at some point in the future and started to take their money out of domestic banks and moved it into German or French banks or into bunds," he commented.

Mr Wade said history is repeating itself in Spain, which means a run on the banks comparable to what happened in the UK with Northern Rock five years ago is now a distinct possibility.

"What markets are waiting for now is for Spain to ask for assistance," he stated.

Mr Wade warned that unless the European Central Bank receives a request for help from the country, it will be unable to take any positive action to address the problem. However, he said Spain's prime minister Mariano Rajo is playing a waiting game instead.

Spain's credit rating has already been reduced by Standard & Poor's from BBB+ to BBB- as a result of its current financial problems.

Indeed, Mr Wade said indicators such as a "frighteningly" high level of unemployment demonstrate that the country's economic policies have failed.

He added that the problems in the eurozone are not going to disappear. As a result, he believes Spain is going to request a bailout in the next two months.

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