Spanish crisis deepens as €15bn set for ailing Bankia
SPAIN'S economic crisis intensified yesterday as Madrid prepared to pump at least €15bn into the country's fourth biggest bank.
Shares in Bankia, which has already been propped up by the Spanish taxpayer, were suspended on the Madrid stock exchange ahead of the move.
The Spanish cost of borrowing on international money markets also soared as Catalonia -- the country's wealthiest region -- said it may need a handout from the central government to pay its bills.
Madrid is in the process of nationalising Bankia, which holds some 10pc of Spain's bank deposits, after it was unable to raise enough capital to cover heavy losses from loans to property developers. Spain has made several unsuccessful attempts to tackle the banking sector's €300bn exposure to a collapsed property boom in 2007-08.
With €184bn of these loans said to be "problematic" by Spain's central bank, the scale of the crisis is such that investors fear Prime Minister Mariano Rajoy's centre-right government will have to ask for international aid to prop up its lenders.
The nation has, meanwhile, slumped back into recession as Mr Rajoy looks to slash €45bn from the budget to bring down the deficit.
Madrid has demanded that the banks set aside an extra €84bn in provisions for property losses this year as well as spinning off bad debts into separate asset management companies.
The government has already spent €4.5bn to prop up Bankia and the entire rescue is now seen totalling some €20bn.