Spain, which for years underestimated losses at its banks, is poised to overestimate how much they can earn in an economy mired in recession.
Spanish mortgage loans are starting to show the “first cracks” in their quality, said Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Group Plc.
An accelerating flight of deposits from banks in four European countries is jeopardizing the renewal of economic growth and undermining a main tenet of the common currency: an integrated financial system.
Slovenia, the first former Communist nation in the euro zone, is facing a typically capitalist dilemma: whether to protect creditors of big banks.
European banks pledged last year to cut more than $1.2 trillion of assets to help them weather the sovereign-debt crisis. Since then they’ve grown only fatter.