The comments box on my previous post, together with the two cited articles, have several good arguments for why, or why not, Caixa should be privatized in the long run. However, my concern in the last post was with the next 6-12 months. And, frankly, I don't see how that is possible. My concerns are:
1. In the next 6-12 months, Portuguese private banks are going to have to recapitalize. Judging from the noise they have made about this, they are very worried that they will not find the needed capital in Portugal. So, if there isn't private money out there to raise capital ratios in private banks by a few percentage points, how can there be enough money to buy 100% of the capital in one of the largest banks?
2. An answer is foreign capital. But then, let's be clear. Privatizing Caixa right now is not just putting it in private hands; it is putting it in private foreign hands. Is that what the people proposing it really want?
3. But even if that is so, I am skeptical that you could find a foreign group that would want to buy Caixa right now, and pay a decent price for it. The natural candidate, Spanish banks, have their hands full with their own problems. And with the amount of uncertainty about Portugal's economic prospects over the next two years, would anyone really be willing to invest this much money in the country?
So, I just don't see it.
I do see the opposite direction, where the government has to inject public capital into the private banks. And I don't have to think too hard to come up with several scenarios where this happens, some desirable, many not so.