Spanish banks are suspending evictions for the next two years for the most vulnerable people. An estimated 350,000 families have been evicted from their homes since Spain's property market crashed in 2008.
The value of bad debts held by Spain's banks in July rose to 169.3bn Euros, according to latest figures from the central bank. The Bank of Spain said 9.9% of banks' total loans were in arrears, up from 9.4% a month before.
Bank of Spain figures show that net capital outflows—including bank withdrawals and sell-offs of Spanish stocks and bonds—equaled more than 50% of the country’s economic output over the year ended July 31.
Spain’s recession worsened in the second quarter as the government’s austerity push to reduce the Euro area’s third-biggest budget deficit and a slump in consumer spending offset growth in exports.
The 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.
Spain took over Bankia, the country's fourth biggest lender, on Wednesday, trying to dispel concerns over the government's ability to clean up the financial sector four years after the banks were hit by a property market crash.