Chalk it up to another round of worries about the European economy: a bank failure in Spain, while small, has fanned the flames of concern about Europe and the broader economic recovery.
Although analysts feel that the takeover of a small bank in Spain isn’t a signal of a larger problem that could bring the country’s financial system to its knees, it did capture the attention of investors who were already nervous about the European economy, reports The Wall Street Journal.
The seized bank is CajaSur, which had $16.4 billion in loads and just 0.6% of the assets in the Spanish financial system. [Know Which ETFs Have Euro Exposure.]
Both iShares MSCI Spain (NYSEArca: EWP) and CurrencyShares Euro Trust (NYSEArca: FXE) were brought down 3.5% and 1.4%, respectively, on the news. Although no one is running for the hills just yet, it’s another blow for Spain, which has a widening budget deficit and 20% unemployment. If more consolidation in the Spanish banking sector occurs, it could tighten credit in the country and worsen the crisis. [The Euro ETF Slide: How Low Can It Go?]
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