Spain to consult on banking merger an unusual step
The Spanish government is taking the unusual step of opening a public consultation on a banking takeover that would lead to the merger of two of the country's biggest lenders.
BBVA
, Spain's second-largest bank in terms of assets, has been attempting a €13 billion hostile takeover of
Sabadell
, the fourth largest.
The Socialist-led government has warned that a merger would destroy jobs and be bad for customers.
It has also raised concerns about the negative impact the new super-bank could have on competition in the financial market as well as worries that it could hurt the many smaller businesses which depend on credit from Sabadell.
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BBVA, which has 13 million customers, has become a global brand with a significant presence across Spain and Latin America. Sabadell has 6.5 million customers and its roots are in the Catalonia region. The new lender would have more than a trillion euros in assets.
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BBVA chairman Carlos Torres has argued that the merger would be good for the Spanish economy, generating a higher tax base and giving the country a stronger financial presence in Europe.
The Spanish market regulator has broadly approved the takeover, although it flagged up areas of concern, such as a possible threat to competition in areas of retail and payment services, where the new entity would exceed 30 per cent of the market share.
BBVA has sought to allay such fears, for example, by pledging not to close branches in smaller towns and keeping existing credit lines open for small and medium-sized businesses.
The government cannot block a bid outright, but it can demand tighter conditions for a deal. As it considers how to proceed, it has opened an online consultation, posted on the economy ministry's website.
Holding a non-binding public debate like this is unprecedented for a big corporate issue, and Spanish prime minister Pedro Sánchez's announcement of it surprised many in the country, but it reflects how thorny this potential merger has become.
The economy ministry must take the issue to a cabinet meeting later this month and the government will then have another month in which to decide whether or not to keep opposing a deal which could make waves across the Spanish and European financial sectors.
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On Tuesday afternoon, diplomats watched anxiously as 26 foreign ministers took their seats in the Europa building in Brussels to assess a Dutch request that the EU review its trade and political relationship with Israel. The proposal came as the weeks-long blockade of humanitarian aid to Gaza was having a critical effect. A senior UN official had publicly warned that 14,000 babies could die unless there was a massive surge in aid. On her way into the meeting Kaja Kallas, the EU's foreign policy chief who chairs such meetings, said: "I can't predict the outcome." The Dutch government was also struggling to predict the outcome. That morning NOS, the Dutch national broadcaster, reported it was touch and go as to whether Caspar Veldkamp, the Dutch foreign minister, would be able to convince a majority (14) of ministers to support the proposal and trigger a review of the EU-Israel Association Agreement. 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Belgium was shifting to the yes camp. By Tuesday morning, however, it was still far from clear a majority was there. On his way into the meeting, Neale Richmond, Minister of State for International Development, told reporters that momentum was growing, from just two countries 16 months ago (Ireland and Spain) to what he believed were ten, now ready to support a near identical proposal. Mr Richmond believed Ms Kallas could order a review of Israel's compliance with Article 2 even without a majority, a point echoed in Mr Harris's letter, which stated that "conducting due diligence on the compliance of our partners with their obligations under our bilateral agreements does not require consensus of the Council [of foreign ministers] - it is the duty and responsibility of the EEAS [the EU's diplomatic arm] and Commission". It was Tuesday afternoon when ministers finally addressed the Dutch proposal. Outrage at Gaza calamity building The Gaza war had bitterly divided the EU like no other subject in recent years, with member states increasingly horrified by the escalating civilian death toll - now over 52,000 - pitted against member states locked into historical support for Israel and the belief that the country had been horrifically attacked on 7 October 2023 and had the right to defend itself. Yet, outrage at the calamity in Gaza was building. Twenty-two donor countries, including Australia, Britain, France and Germany, had demanded that Israel immediately "allow a full resumption of aid into Gaza" after the partial lifting of its blockade. French foreign minister Jean-Noel Barrot said France could soon recognise the State of Palestine. Sweden was clamouring for sanctions against Israeli ministers. Would member states, for so long divided, and so often the subject to the vitriol of popular anger over Gaza, shift collectively into a much more critical posture? Two weeks beforehand, there was a discernible uptick in anger at Israel during an informal meeting of EU foreign ministers in Warsaw. The French minister pushed again for EU sanctions against violent settlers in the West Bank (a proposal that has been relentlessly blocked by Hungary). Also in Warsaw, an early draft calling on Israel to open up humanitarian corridors in Gaza was blocked by Hungary because there was not a strong enough reference in the text to the Hamas 7 October attacks. On Tuesday, Ms Kallas decided to put two proposals before ministers: one on the Dutch request for a review of trade ties with Israel (which would require a majority), and a statement urging the creation of humanitarian corridors and a massive increase in aid (which required unanimity). It was clear from the outset that Ms Kallas was looking for ministers to give a clear position, rather than hide behind vague interventions. "Kallas was very adamant," said one source familiar with proceedings. "She needed a definite answer from everyone, yes or no." It was almost like Eurovision. We kept getting the scores in. According to a firsthand account, Mr Veldkamp spoke first, followed by the new German foreign minister Johann Wadepuhl. He made it clear that Germany had a historic obligation to support the survival of the Jewish state and as such could not support the Dutch proposal. However, what was happening in Gaza was unacceptable, and he would convey this to the Israeli foreign minister. After the Romanian minister spoke, Ms Kallas is understood to have said she still did not understand if he supported the proposal or not. The minister said he did. The Lithuanian foreign minister was sympathetic, but wanted to give Israel another week to demonstrate that humanitarian aid would massively increase. The tension inside the room deepened. Ministers learned from their phones that Britain had just announced that it was suspending trade talks with Israel after one minister said they wanted to "purify" Gaza by expelling Palestinians. The numbers supporting the Dutch proposal started to inch up. According to one source, ministers were seen nodding in approval after an emotive intervention by Mr Richmond. Sweden said it was "unequivocally" supporting the motion. "We kept getting updates," said one diplomat. "It was almost like Eurovision. We kept getting the scores in. Now they're at 12. That was what was expected so far, but no majority yet." Mr Richmond emerged from the meeting at 5pm. He confirmed to RTÉ News that the numbers were stuck at 12, two short of a majority. "A lot more member states are expressing very clear concern and condemnation of the Israeli actions," he said, "both in terms of humanitarian aid and blocking it, as well as the promise to escalate the situation militarily". He added: "The discussion has been very emotive, we're talking about the possibility of 14,000 babies dying in Gaza in the next 48 hours. "That case was made quite clearly. While some member states were unable to support what we think is a very modest proposal by the Dutch, they are keeping an open mind." In reality, it was that open mind which was key. The decisive moment Three countries - Denmark, Austria and Slovakia - were understood to have entered the room with an either/or mandate. In other words, they should see what way the wind was going, and then go with the majority. In some cases, national coalitions remained split on the issue. "Everybody would have counted the Austrians in the traditional pro-Israeli camp," said one EU diplomat. "Along with the Slovaks these were the most eye-catching interventions." Beate Meinl-Reisinger, Austria's minister for European and International Affairs and a member of the liberal NEOS party, is understood to have said she was not personally in favour of the move but would not stand against it. That was a decisive moment. A majority started to look possible. Slovakia had not signed up to the humanitarian corridors statement in Warsaw two weeks ago; however, on Tuesday foreign minister Juraj Blanár told Ms Kallas he could support the Dutch proposal (afterwards he said the move was about "maintaining dialogue" with Israel, rather than reviewing trade ties). "Soon there were 13 countries," said the EU diplomat. "That's good. Then fourteen, that's a majority - but it's still fragile. Then 15, 16, finally 17. You could feel everyone in the room thinking, wait, this is actually happening." At 5.50pm Brussels time, it was clear. Kallas had the strong majority she wanted: 17 in favour, nine against. Later that evening, all 27 ministers unanimously supported the humanitarian corridors statement. Ms Kallas will now instruct the EU's diplomatic arm, the EEAS, to carry out the review, a small step in relative terms (the Dutch did not request a triggering of the human rights clause under Article 2). Why did the Dutch succeed where Ireland, Spain failed? To fervent opponents of Israel's actions in Gaza, the EU has been shamefully silent on allegations of genocide and ethnic cleansing, so the fact that a majority of member states have shifted to a much harsher position than before and have called for a review of trade ties, will be too little too late. However, the reality of the national veto on foreign policy decisions at EU level means a handful of member states can block more decisive action for their own historical reasons. But why did the Dutch succeed where Ireland and Spain failed? Numerous officials and diplomats insist that the context is entirely different, compared to 16 months ago. "The Dutch have historically not been very critical of Israel, so it was more surprising," said a senior EU official. "[The vote] was also coming off the back of an 11-week blockade of Gaza, and the fact they're now talking about distributing aid in a way the international community doesn't feel is in line with humanitarian law. "There is growing anger and frustration that the situation in Gaza is even worse than it was before. Therefore, it's built up much more of a head of steam compared to when Ireland and Spain requested the review. Then, there was very little support, but there were 17 member states in favour today." Not only had the Netherlands been a strong supporter of Israel: Mr Veldkamp had served as the Dutch ambassador in Tel Aviv and had publicly declared his abiding affection for the country. However, sources familiar with the situation say that Mr Veldkamp had been under increasing pressure to explain his pro-Israeli stance as the news from Gaza got worse and worse. While he had publicly defended what he called his "silent diplomacy" towards Israel, he privately concluded the Israelis were not listening and he was starting to pay a political price. The fact that upwards of 100,000 red-clad and peaceful demonstrators had taken to the streets in The Hague on Sunday undoubtedly reassured Mr Veldkamp that he was on the right side of the debate. He was also seen as a highly experienced hand in a shaky coalition government led by the far-right Geert Wilders and his VVD Freedom Party. Mr Wilders publicly chastised prime minister Dick Schoof for permitting Mr Veldkamp's letter being sent to Ms Kallas, complaining that neither he nor VVD cabinet ministers had been told in advance (they were not). After Mr Veldkamp sent the letter, the Dutch government launched an intensive outreach to other member states to canvas support. The effort was mobilised through embassies and intergovernmental contacts. Ministers in EU coalition governments who were thought to be more sympathetic to the Palestinian cause than their government were worked on to create momentum. "It was diplomacy in its purest form," said one source. However, sources said there was a key difference between his letter and that of Mr Sanchez and Mr Varadkar. "The Dutch made it about the review [of the EU-Israel Association Agreement] and not about the consequences," said one official. "The Irish and Spanish letter was very much about the consequences, that we need to suspend the Association Agreement." The argument is that the softer Dutch approach, and the fact that they had been strong supporters of Israel, convinced a significant number of member states to row in behind the proposal; after the vote Mr Veldkamp was at pains to say he was "a friend of Israel". A further critique of Ireland's approach is that Mr Varadkar and Mr Sanchez were "too strident, too early" in pushing for a review; both countries were seen as "outliers" on the spectrum of opinion. "Ireland and Spain had no allies when it mattered," said a senior EU figure. Even Xavier Bettel, the Luxembourgish foreign minister - a co-signatory to Mr Harris's letter supporting the Dutch proposal - is understood to have told the meeting on Tuesday that this was not the "usual suspects" of Ireland and Spain and should therefore be taken more seriously. What difference the review makes, now that it has been endorsed by a majority of national capitals, remains to be seen. After the Irish-Spanish initiative last year, Ms Kallas's predecessor Josep Borrell failed to secure a consensus, even after he commissioned his own report on Israel's actions. That report, drawn up by the EU's Special Representative on Human Rights Olof Skoog and presented to EU foreign ministers last June, found that Israel was guilty of breaches of human rights and international humanitarian law. However, it was effectively a compendium of findings by other international agencies and NGOs, since the EU did not have staff on the ground; it was still not sufficient to trigger an embrace of the Irish-Spanish proposal, either by foreign ministers or the European Commission. Mr Borrell himself proposed suspending political dialogue with Israel, but that idea was shot down by a number of countries (not least the Dutch). Mr Skoog is now Deputy Secretary General for Political Affairs at the EEAS, the EU's diplomatic arm, and will have considerable influence on what happens next. There is a belief that a formal review of Israel's compliance or otherwise of Article 2 will undoubtedly find Israel in breach, since the same methodology used by Mr Skoog would be repeated, and Israel's actions have been more intense since his first report (following the vote on Tuesday, Ms Kallas said as much). At that point, we're back into challenging territory. For sanctions to happen the Commission would have to formally adopt "appropriate measures" against Israel, meaning adoption by all 27 commissioners (including the Hungarian, Italian and German members). If the Commission believes that trade sanctions are appropriate, then a qualified majority of member states would be needed to approve them (roughly 15 out of 27 capitals which also represent more than 66% of the EU population); if political sanctions are recommended that would require unanimity. "I could imagine that having the results of such a review creates its own dynamic, again," said a diplomat from one member state which approved of the review. "We're on a course to create political pressure for the course of events in Gaza to be changed. The most important thing right now is massive humanitarian access as quickly as possible, and we shouldn't have to wait for the end of a review for that. "Hopefully the start of a review creates enough political pressure on Israel and [prime minister Benjamin] Netanyahu to allow for more aid to go in." If not, there are few indications that the EU, with its matrix of competing national positions on Israel and the Palestinian question, will move to full trade sanctions. Irish sources have wholeheartedly supported the Dutch move and accept that the context is entirely different compared to 14 February last year. The Dutch, historically supportive of Israel, being able to mobilise a core middle group of influential countries was key to getting the majority on Tuesday, they say. Sources point out that Ireland has been the first to push for a ceasefire, the first to support UNRWA and the first to push for support for the Palestinian Authority, policies for which Dublin drew heat, but which have since moved into the mainstream.
