MADRID —Spain’s surging bad loans are spurring doubt on whether the government can convince investors that it can clean up its banks without further damaging public finances.
Nonperforming loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data published Wednesday. The ratio rose from 7.91 percent in January as loans worth about $5 billion soured in February, a 110 percent increase from the same month a year ago. That takes the total credit in the economy that the regulator lists as “doubtful” to about $188 billion.
“One of our concerns in Spain is to what extent contingent liabilities could pass to the central government,” said Andrew Bosomworth of Pacific Investment Management.
