Left-wing coalition sends jitters through Spanish banking
Spanish bank profitability will sink even further as left-wing populists Podemos enter a coalition with the socialist party, making a private-sector future for Bankia ever more remote.
Podemos’s Pablo Iglesias embraces PSOE's Pedro Sánchez after signing the coalition agreement
Banks in Spain are bracing themselves for yet another big blow to their profits, thanks to the anti-establishment Podemos party’s moves towards forming a coalition with the centre-left socialists after Spain’s indecisive November election.
Podemos and its bank-bashing leader Pablo Iglesias have advocated higher corporate taxes, especially on banks, as well as a new financial transactions tax.
Podemos rose to prominence after the eurozone crisis on the back of popular anger against the Spanish establishment, especially banks. This is by far the closest Iglesias has come to government.
His proposals reflect the popular view that banks need to pay back the fiscal aid they received in the crisis, through bailouts, inducements for stronger banks to take over failing institutions and deferred tax assets booked on losses.
One source of hope for the banks is that that socialist party PSOE will retain the upper hand in the coalition, with its leader Pedro Sánchez likely to remain prime minister, and possibly insisting his party keeps the key economic posts.
That could curb the more radical parts of Podemos’s programme.