The European Commission announced on Thursday, July 17th, that it had opened an infringement procedure against the socialist government of Spanish PM Pedro Sánchez for granting itself sweeping powers to block bank mergers, which undermines the financial integrity of the EU.
As Spain is already at a tipping point, and millions are demanding Sánchez’ resignation, this new situation might speed up the eventual collapse of the government.
The EU’s move comes after Sánchez has been blocking the merger of Spain’s second and fourth-largest banks, BBVA and Banco Sabadell, which collectively own nearly €1 trillion in assets.
According to the formal letter sent by the EU Commission to Madrid, the legal framework that the government set up to block the merger breaches core financial rules of the EU, particularly on the freedom of establishment and movement of capital.
Furthermore, the Commission also criticized Sánchez for overruling the Spanish Competition Authority (CNMC), which had conditionally approved the bid.
The power grab was prepared with the 2014 banking law and its 2015 implementing decree, which gave the Spanish Ministry of Economy excessive discretionary powers over banking operations—something that falls under the exclusive competence of the European Central Bank within the euro zone.
According to Brussels, this undermines EU financial regulations and legal certainty for cross-border banking deals.
The Spanish government has two months to respond. If the Commission finds Madrid’s reply unsatisfactory, it may take the next steps by issuing a ‘reasoned opinion’ and referring the country to the EU Court of Justice (ECJ) for breaching EU rules. The Court can then decide on appropriate sanctions.
While there’s no immediate consequence, the procedure could escalate the anti-government protests in Spain, leading to the premature fall of the corrupt socialist government. Over 100,000 people protested in Madrid against Sánchez last month, and both right-wing opposition parties, PP and VOX, believe he will have no choice but to eventually call early elections.
