If Spain is going to be saved, someone better convince Spanish citizens because Deposit flight from Spanish banks hits 15-year high as bailout rumours grow
Spanish banks lost €1 out of every €20 deposited with them in July, making it the worst month for deposit flight in 15 years as rumours grew that the country is edging closer to a full bailout.The amount of money Germany is going to lose when Spain and Italy decide to exit the euro grows leaps and bounds every month.
News that banks were losing deposits came as Spain's statistics institute revealed the current recession is worse than thought, with the economy shrinking at an annual rate of 1.3% in the second quarter.
"The downturn in the Spanish economy is deeper than previously thought and accelerating," warned Robert O'Daly of the Economist Intelligence Unit.
Tuesday's revised figures showed recession started three months earlier than previously indicated. "The data shows the recession started in the third quarter of last year," secretary for state for the economy, Fernando Jiménez admitted.
A collapse in internal consumption in a country squeezed by government austerity and massive unemployment is largely to blame for the recession, as this fell at an annual rate of 3.9% in the second quarter.
Unemployment is already at 25% but the speed at which jobs are being destroyed quickened to an average rate of 800,000 jobs a year in the second quarter, according to the statistics institute.
That helps explain why Spaniards, and their companies, are both reducing spending and putting less money in the bank.
Mike "Mish" Shedlock
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