Cold Call's  Instablog

It's not news that Spain's regional banks called "cajas" have been in serious trouble since 2008, but the plan was that they implement an orderly consolidation by merging the weakest with the strongest.

However over the weekend the news that Cajasur's administration was taken over by the Spanish central bank could be an indicator that the consolidations are running into some serious headwinds.

The original plan was for a merger between Unicaja and Cajasur. They had been negotiating the deal since December, but the deadline set by the Spanish government for last Friday passed with no deal in sight, so the central bank stepped in on Satuday and did what needed to be done.

So that's sorted out - or is it?

What is somewhat disturbing is that the reports suggest it was union intransigence which killed the merger deal with Unicaja. So there we had Cajasur which was 500 million euros short of solvency, basically bankrupt, and the unions were still holding out against job cuts in order to make the new combined Uni/Cajasur a going concern.

This could portend more trouble with unions relevant to any of the other mergers between Cajas and does question whether there is the will within the Spanish workforce to make some sacrifices in order to stabilize their banking system.

It will be interesting to see how the other Caja mergers play out and whether unions continue to obstruct the necessary consolidation.

Stay tuned!




Disclosure: No positions