Euro Down Again on Spain Bank Nationalization
By wchung | 19 Apr, 2026

The euro dropped sharply Monday after the weekend’s de facto nationalization of a regional bank in Spain reignited fears about the continent’s debt crisis and its impact on the banking system.

By early afternoon London time, the euro was down 1.3 percent at $1.2378.

The latest bout of jitters arose in the wake of the decision by the Bank of Spain take over regional savings bank CajaSur after merger talks with Unicaja broke down.

Though Cajasur is though to account for less that 1 percent of Spain’s financial assets and the Spanish government insisted that the country’s financial system is “absolutely solvent,” CajaSur’s effective failure is a timely reminder of the adjustment many of the country’s banks have to go through following the collapse of the construction boom.

“Its woes highlighted the problems faced by many Spanish savings banks due to property market exposure,” said Mitul Kotecha, head of global foreign exchange strategy at BNP Paribas.

CajaSur may not be the last Spanish institution saved by the state — last month the International Monetary Fund warned about the potential damage on bank balance sheets from the combined impact of the real estate recession and an unemployment rate hovering around 20 percent.

CajaSur’s fate also put in sharp relief the difficulties many of Europe’s banks may be facing as governments look to get a handle on their debts by cutting spending and raising taxes — hardly a brew for solid growth in the years ahead.

The rescue of CajaSur follows last week’s decision by the Bank of Italy to suspend mark to market requirements on Italian bank exposure to eurozone government bonds, which fueled fears that an Italian bank may be in trouble. Suspending the requirement means the banks do not have to reflect the fallen value of the bonds on their balance sheets or earnings statements.

“The market is becoming concerned that more bad news concerning the positions of banks could be in the pipeline,” said Jane Foley, research director at Forex.com.

A spate of banking difficulties would be another headache the euro could do without — nevertheless, despite Monday’s sharp fall, Europe’s single currency is still way up from the four-year low of $1.2146 recorded last Wednesday in the wake of Germany’s shock decision to ban naked short-selling.

Elsewhere in the currency markets, the British pound dropped 0.7 percent to $1.4376 despite a package of spending cuts from the new coalition government, while the dollar was trading 0.1 percent lower at 90.08 yen.

PAN PYLAS, AP Business Writer LONDON