Spanish Premier Picks the Risky Option Backing Catalan Bank Deal
(Bloomberg) -- When Catalonia’s biggest lender announced plans to absorb a state-owned rival, Spanish Prime Minister Pedro Sanchez spotted an opportunity. His public endorsement of the deal would make his wobbly government a shareholder in the biggest banking operation in the country.
CaixaBank SA’s acquisition of Bankia SA would strengthen a financial system battered by the coronavirus lockdown, it would give Spain another card to play if the long-awaited European banking shakeout ever happens, and it would help to keep CaixaBank away from the Catalan separatists who spent most of the past decade trying to force a split from the rest of Spain.
But there’s a snag. Sanchez’s insistence on a government appointee on the board of the new entity is meeting pushback from some of those involved in the deal, according to people familiar with the talks. And his support for the “de-Catalanization” of CaixaBank is raising heckles among the separatists he relies on in parliament.
Spokesmen for both banks declined to comment.
CaixaBank has been a symbol of Catalonia’s industrial prowess for over a century and was a key plank of secession plans for an economically viable state. At least one senior executive had tried to exploit his position to help the separatist cause in the run-up to the illegal referendum of 2017.
CaixaBank’s management, however, has been trying to distance itself from that political minefield.
At CaixaBank’s operational base on Avenida Diagonal in downtown Barcelona and at the regional government’s offices in the medieval heart of the Catalan capital, senior figures are viewing the deal as part of the process that aims to embed the lender more deeply in the wider Spanish economy and to prevent the separatists rebuilding their influence, people familiar with those conversations said.
CaixaBank shifted its legal domicile from Barcelona to Valencia in 2017 to avoid being shut off from European Central Bank funding in the event that the separatists had succeeded in forcing a split.
Sanchez himself said last week that the deal would help improve “national cohesion,” highlighting the fact that the new bank would have a strong presence in both Barcelona and Madrid. The pro-independence Catalan regional government is demanding that the new entity have its headquarters in Barcelona.
The two lenders are currently locked in negotiations with a decision expected in the coming days and the executives involved are waiting to see who the government might nominate as a board member. A technocrat or someone with banking experience would offer reassurance, a more political operator would set alarm bells ringing, people with knowledge of the discussions said.
The complication for Sanchez is that he needs the separatists governing Catalonia to help him pass a budget for next year, a vital step to consolidating his minority government’s position.
The idea of a merger diluting the government stake in Bankia has angered his junior coalition partner, Unidas Podemos, which had designs on converting the lender into a state bank that could be used to help implement government policy.
And the prospect of thousands of job losses amidst the country’s biggest recession in decades is likely to worry the rank and file in Sanchez’s Socialist party.
If the cards fall his way, the deal would strengthen Sanchez’s hand as an ally for German Chancellor Angela Merkel and her French counterpart Emmanuel Macron in the European leaders’ council.
The risk though is that the deal could derail his budget strategy or create a new giant lender hampered by political divisions as the coronavirus batters Spain’s economy.
In that scenario, Sanchez might not be able to do much to help the EU’s two biggest powers and he could start to be seen as another problem.
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