Stiglitz: Spain Bank Deal May Not Work, Bolder Euro Reforms Needed

“Europe’s plan to lend money to Spain to heal some of its banks may not work because the government and the country’s lenders will in effect be propping each other up, Nobel Prize-winning economist Joseph Stiglitz said.

“The system … is the Spanish government bails out Spanish banks, and Spanish banks bail out the Spanish government,” Stiglitz said in an interview.

The plan to lend Spain up to 100 billion euros ($125 billion), agreed on Saturday by eurozone finance ministers, was bigger than most estimates of the needs of Spanish banks that have been hit by the bursting of a real estate bubble, recession and mass unemployment.”

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