May 11, 2012
Luis de Guindos had one last clandestine mission before unveiling his plan to the public and jittery financial markets. The Spanish finance minister had just won a furious backroom battle to oust Rodrigo Rato, a favourite son of his ruling centre-right Popular party, from the helm of Bankia and nationalised the faltering year-old assemblage of savings banks that had collapsed after betting wrongly on the country’s housing bubble.
But the most critical stage of his still-young tenure was facing him on Friday. He needed to convince the world that his government finally had a scheme to shore up its sinking banking sector, which bond traders were betting would force Madrid to seek EU aid, making it the fourth in a rogue’s gallery of eurozone governments to succumb to foreign management.
Before he could convince the markets, however, he had to convince the people who ran Europe. First on his list was Olli Rehn, the ruddy-faced EU economic and monetary affairs commissioner. But the increasingly powerful Finn was not in Brussels, having flown off to meet Mario Monti, the Italian prime minister. A compromise was agreed: Mr De Guindos would fly under cover of night to Milan on Wednesday, away from the prying press corps in Madrid and Brussels.
Over a late dinner in the Italian financial capital, Mr De Guindos laid out his plan: he would force Spanish banks to raise another €30bn in cash to offset expected losses on their property portfolio, taking total “provisions” to nearly €120bn. The next morning, he flew surreptitiously to Frankfurt, where he made the same presentation to Mario Draghi, the courtly Roman who heads the European Central Bank.
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