Spain plans a partial state takeover of its weakest savings banks as it seeks to reassure investors a rescue will not weigh on its deficit, AP reported. A source familiar with the matter told Reuters on Friday the government would force debt-laden regional savings banks to become conventional banks and seek stock market listings to persuade skittish investors that they are good investments. The state-backed bank restructuring fund (FROB) would then take stakes in the banks -- known as cajas -- that fail to attract private investment, the source said. Up to now the FROB has functioned as a lender of last resort to the cajas. Deputy Prime Minister Alfredo Perez Rubalcaba told reporters a new savings bank plan was coming soon and could include new laws, implying a reform of the FROB. High levels of bad property loans at the cajas are seen as a major risk for Spain, working to slash its budget deficit to stave off fears it will need an Ireland-style rescue from the European Union and International Monetary Fund. Signs of greater transparency and a definitive plan for the banks sent Spain's 10-year benchmark bond to its highest price since early December and shares in Spain's biggest banks jumped to their highest level since Nov. 1. "I think it's encouraging. One of the root causes of the lack of confidence in the euro area is the fear that Spain is the next Ireland," BNP Paribas chief euro zone economist Ken Wattret said. Analysts' estimates of the cost of recapitalising the savings banks range from 17 billion to 120 billion euros, with consensus falling in the 25 billion to 50 billion area, though Economy Minister Elena Salgado says it will be much lower. Rubalcaba declined to provide details. Media reports said the economy ministry and central bank have not yet agreed on details of how the partial nationalisation would be implemented. -- SPA
