What Can Stop the Southern European Bank Rally?

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Aug. 23 (Bloomberg) -- Bloomberg News' Charles Penty discusses the recent rally in Southern European banks and looks at what may threaten the continued growth. He speaks on Bloomberg Television's "The Pulse."

For more, let's turn to our bank supporter.

He joins us from madrid.

It has been a great rally.

There has been a change in sentiment.

The italian banks are up.

What is driving it?

It's two things.

There has been an improved tone in the economic data from the southern european countries here in sappain.

This long economic slump is showing signs of easing.

It is the same story in italy.

We had data from the bank of spain which shows that clearly the government is saying that growth is about to start.

Spain is poised to grow.

I do not think anybody is saying it will be anything more than sluggish growth.

The improved tone has helped.

The bond markets have helped, too.

The improving of financing for southern economies has helped the banking system.

What is going to threaten it?

You have an unemployment rate, one of the highest in the eurozone.

It is not easy.

There is a lag between losing your job and missing your mortgage payments and defaulting.

What is the outlook as we switch over from the end of this year into 2013 in terms of this rally-- in 2014 in terms of these rally?

We had bad loans that showed an increase to 11.6%. that is a high number in spain.

People think it could go up and up.

Well through next year.

That was the reason for people to take stock.

A huge rally we had.

It was a reminder of the economic conditions we had in s pain.

That said, the bad loans numbers are a lagging indicator.

So people have to take that into account.

I think that was a reality check for investors.

We do see some selling off in the early part of the week.

Tnobody pretends that the economic conditions in spain are not still very tough.

I think we've got that loud and clear.

Great to have you with us.

Back to you.

This text has been automatically generated. It may not be 100% accurate.


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