The European economy edged towards a fresh crisis yesterday, as Spain's leaders were forced to admit that credit had dried up for some of the country's banks.
In a development that has echoes of the economic panic which swept the world in the wake of the collapse of Lehman Brothers, Spain's finance minister and a senior banker admitted that the country's banks were being hit by a freeze on the international lending market, with cash flow at a stand-still.
Business leaders and politicians warned that the crisis in confidence could have repercussions across Europe.
German chancellor Angela Merkel raised the prospect of Spain becoming the second country after Greece to get a euro bail-out. Banking sources said the liquidity freeze was affecting savings banks and small banks, but not the country's biggest financial institutions.
Among those are Santander – which owns Abbey National, including Bradford & Bingley – and BBVA, which was in talks this month to buy the Yorkshire and Clydesdale banks. Other big players in the Spanish banking sector include Banco Popular Español, La Caixa and Bankinter.
Source/full story: The Scotsman, 15 June 2011