D-Day

The international press is rife with speculation that the Spanish government will be partially or wholly nationalizing, less than impressed with their half-hearted efforts to sort themselves out, a number of cajas de ahorros. Estimates that this writer has encountered as to the amount to be devoted to this task range from 15 billion euros - to 80. Interestingly, investors in Spanish debt seem to have finally got it into their heads that even the highest of these rumoured amounts will not prove to be an unbearable burden on the Spanish government. The 10-year benchmark spread briefly got under 200 bps last week - for the first time since November - before closing Friday at 203.

Whether he has the courage to actually do it, the call the writer would like to make is that the Bank of Spain and the PSOE government are tired of Rodrigo Rato's playing party politics with the SIP over which he presides... and are going to go directly for BancaCajaMadrid/Banco Júpiter. As badly as the current powers-that-be would like to see the caja situation resolved as soon as possible, the former PP finance minister (who made Aznar's short list for leadership of the party) would loathe the possibility that some perfectly rational action by his ward would end up throwing a lifeline to the socialists.

In any regard, the BdE's direct taking of an equity position in that monster would be an interesting twist on our previous bit of fantasizing about Júpiter and equity issues and the like.

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