Spanish banks’ borrowing from ECB spikes

Borrowing by Spanish banks from the European Central Bank reached a record in June, rising 17 per cent over one month to €337.2 billion ($ 418.3 billion Cdn).

As the data was released by the Bank of Spain Friday, hundreds of Spanish civil servants took to the street to protest continuing austerity measures by the government.

Some dressed in mourning to protests their second wage cut in as many years.

Others blocked traffic in Madrid. In Valencia, several hundred justice ministry workers shouted “hands up, this is a stick-up” at a protest rally.

The borrowing by Spanish banks reflected increased withdrawals in the weeks preceding an agreement on a €100 billion ($124 billion) bailout for its financial sector announced by European Union leaders a month ago.

Over the year, banks’ monthly borrowing from the ECB has increased sevenfold, from €47.8 billion in June 2011.

Spain’s banking industry is struggling to finance itself under the weight of toxic loans and assets from a real estate market collapse in 2008.

Investors are becoming increasingly wary of placing money in Spanish banks.

The civil servants—- who saw their wages cut by five per cent on average in 2010 in the first round of austerity cuts—- are usually paid 14 times a year.

The government is proposing to axe an extra payment normally made just before Christmas.

The cuts, which also include a sales tax increase and overhaul of benefits, are part of a series of measures unveiled by Prime Minister Mariano Rajoy designed to shave €65 billion off the government’s budget through 2015.

The cabinet was scheduled to approve the wage cut and other austerity measures Friday.

With files from The Associated Press

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