Spain's new Prime Minister Mariano Rajoy named his government this evening, with ex-Lehman Brothers banker Luis de Guindos in the pivotal job as economy minister.

The prime minister, who led his Popular Party to a landslide election win on November 20, named Jose Manuel Garcia Margallo as foreign minister and Jorge Fernandez Diaz as interior minister.

Spain names ex-Lehman executive as economy minister
Spain's new Prime Minister Mariano Rajoy named his government this evening, with ex-Lehman Brothers banker Luis de Guindos in the pivotal job as economy minister.

The prime minister, who led his Popular Party to a landslide election win on November 20, named Jose Manuel Garcia Margallo as foreign minister and Jorge Fernandez Diaz as interior minister.

51-year-old Luis de Guindos, comes to the job as a survivor of one of the world's biggest financial failures - the collapse of US investment giant Lehman Brothers. He faces a daunting task rescuing an economy teetering towards recession with a 21.5% jobless rate.

He has some solid political credentials with the ruling Popular Party, which won an election landslide on November 20 as voters punished the Socialists for their handling of the economic slump.

De Guindos was a member of then prime minister Jose Maria Aznar's team from 1996-2004, working in the economy ministry and rising to become state secretary for the economy from 2002-2004.

The reputed economist has also carved out a career in the private sector. After rising to the post of chief executive of financial consultancy AB Asesores, he became executive chairman for Spain and Portugal at Lehman Brothers from 2006-2008.

Lehman collapsed on September 15, 2008, after its risky bets on the US housing market turned bad, sending shockwaves through the world's banking system and sparking a global credit crunch. Only this month, a US judge approved plans to end Lehman Brothers' US bankruptcy and move it toward liquidation, settling creditors' claims worth around $450 billion.

Nomura Securities bought some of Lehman's Spanish assets in 2008 and De Guindos worked for the Japanese firm for several months of that year. He is now director of the Financial Sector Centre, created by PriceWaterhouseCoopers, and of the IE Business School in Madrid. He is also on the board of energy group Endesa.

De Guindos favours the creation of a "bad bank," a state-run structure that would pool the bad property assets weighing down banks since the 2008 housing bubble collapse.

He has called for deep reforms of the banking sector, of the labour market with notably a relaxation of collective bargaining rules, and of the property market with measures to stimulate rentals.

Fitch warns of downgrades for Spanish regions

Fitch warned today that it may downgrade the credit rating of 14 territories in Spain including the key regions of Madrid and Andalucia.

Fitch placed the credit rating of the 14 regional and local authorities on 'Ratings Watch Negative,' meaning they could be lowered, it said. The action was in line with Fitch's overall rating on Spain, which was among six euro zone countries it placed on downgrade watch on December 16. Spain has an AA- rating from Fitch.

''The RWN indicates that the ratings are under active review and are subject to a heightened probability of a downgrade in the near-term," Fitch said. "Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches,'' it added.

As well as the Madrid region and Andalucia, the downgrade warning targeted the regions of Asturias, the Canary Islands and Cantabria. The other ratings affected were for the city authorities of Madrid, Pamplona, Vigo and La Coruna, two separate city and provincial authorities of Barcelona, and three other territories: Alava, Bizkaia and Gipuzkoa.

Fitch and the other two major credit ratings agencies, Standard & Poor's and Moody's Investors Service, each downgraded Spain's sovereign debt in October, warning it was at risk from the euro zone debt crisis.

Spain has already imposed spending cuts on its regions in its efforts to trim the national deficit, which is a big worry for the financial markets that lend it money.

Prime Minister Mariano Rajoy, who took office today, has vowed to deepen the cuts and pass urgent fiscal and labour reforms to boost the economy and reassure investors.