News that several Spanish savings banks may have failed the stress tests is a big plus for confidence in the exercise. Headed into the tests most assumed that the cajas, which were decimated by the bursting of the property bubble in Spain, would struggle.For a while there, it looked as they would pass the test which helped undermine confidence in the whole idea of the tests.
Spain has been rolling up the savings banks and providing capital to those that need it for the last several months, so the infrastructure is in place to deal with the failures.
Goldman forecasts only EUR 37.6 bln in capital in the aggregate needs to be raised for all of Europe, not a game-changer.
Don’t run out and buy EUR/USD on this view, it is a macro piece of a very big puzzle…
