The European Central Bank seems to be showing the UK authorities how to support banks successfully in its propping up of Spanish banks with significant mortgage exposure.

The Spanish property market has been in a state of crisis for a while now after a decade long building boom ground to a halt.  This meant that many of the country’s banks were already in a parlous state even before last summer heralded the arrival of the credit crunch.  When the interbank lending system ceased to function, they found themselves in a similar position to Northern Rock.  The ECB, however, has worked quietly to extend credit on favourable terms even when the collateral provided was slightly dubious.

This meant that Spain avoided the spectacle of officialdom rushing around and bumping into each other that we had in the UK.  They also did not have to watch a run on a bank live on TV.  Still, let us hope that the great and good have learned a lesson and we never face this sort of national embarrassment again.