Was it only yesterday I was admitting my [ignorance-based] concerns about the Spanish banking system were diminishing? I ask because of this headline in a British paper this morning -Banco Santander is to raise €7.2bn in fresh capital and foreswear further expansion in a shock move that raises fresh questions about the underlying health of the Spanish financial system. It will be an interesting week. Meanwhile, the president of the competing BBVA bank hasn't wasted any time in going on the attack. According to El País, Especialmente contundente fue la respuesta de la entidad presidida por Francisco González. Este banco comentó ayer, en una nota enviada a sus oficinas, que el Santander ha optado por una estrategia "mucho más agresiva" que la suya, al llevar a cabo adquisiciones en Reino Unido, Estados Unidos y Brasil, "sin que a la fecha actual se conozcan los impactos finales de algunas de estas compras. Todo ello supone importantes consumos de capital y aumento de los riesgos asumidos". It seems it has something to do with parcelling up and selling on mortgages based on phoney valuations way above the real value of the property. As was done for the desperately over-geared seller of the house we recently bought in the hills. Which parcels may now be more toxic than previously admitted. We will see. But I guess we won't be seeing Banco Santander picking up the two major Scottish banks, should the Lloyds TSB deal fall through.

BTW - There's an apparently informed comment on this subject [by mazbox] at the end of the Economist's review of the Spanish financial system. Click here, if you're interested.

Re-reading The Economist’s review today – not to mention all the numerous comments at the end of each section – I was struck yet again how much of a de facto federal state Spain now is and how it might be better for some of the regions to vote themselves out of it. Of course, it’s easy to say now that Spain missed a trick after the death of Franco by not converting itself back then into a truly federal state with some of the ‘intelligent design’ of, say, the USA and Germany. But the inescapable truth is that Spain is stuck with a messy political model that is probably going to be more of a hindrance than a help over the difficult few years ahead. Let’s hope President Zapatero is up to it.

The gentleman in question had a meeting with the country’s bankers yesterday, where they reportedly asked him to take advantage of his seat at next week’s New York conference to ensure that whatever measures agreed on are not primarily aimed at helping the German and French economies. Some challenge. But at least there’s a lot of nice mood music in Anglo-Saxon quarters about the smart response of the Bank of Spain to the country’s banking problems in the 90s and how these might be more widely relevant now. But more unexpected news from Banco Santander might just upset this applecart.

Moving to the UK . . . Insane Britain: No 347. Guidelines on how to mollycoddle your pets. More.

Galicia

I talked of seriousness yesterday and today I see that the Pontevedra police are going to clamp down on drivers who use the city’s loading and unloading bays as free parking spaces. Excellent. But will the campaign last more than the usual day or two? And will the city bring back traffic wardens?

At a session of a parliamentary committee, Galicia’s Chief Prosecutor has described the prosecution of municipal corruption as ‘a complete fiasco’. I wonder what he means. After all, while there may be one or two local people who are reported to be far wealthier than when they entered politics, I’m not aware of any big names being arrested.

At a more elevated level, the President of the Galician Nationalist Party[the BNG] has proposed the setting up of a new public body to act as a credit agency. I’m guessing this would fall into the BNG’s portfolio and that it would help to extend the control over the local business-financial nexus already exercised through the savings banks[the Caixas]. However, the Xunta President – and leader of the PSOE-BNG coalition – has hit the notion on the head, stressing that the financial crisis doesn't call for nationalist solutions. Meaning parochial, I guess. We must be coming up for elections.

Two Spanish soldiers – from a Pontevedra base – were killed in Afghanistan this week. They will naturally be given full funereal honours, with ministers and royalty in attendance. But the latest Galician youth to drive into a wall at of a Sunday morning won’t be accorded such treatment, of course. Which doesn’t seem entirely logical to me. Especially as effective policing of the local nightspots would come at a fraction of the military spend in Afghanistan. But maybe it’s not politically feasible. Or, more likely, I just don't understand politics.