Spain's Plan To Bailout Bankia Worries Markets
Spain's 10-year borrowing rate approached 7 percent and Bankia shares plunged nearly 30 percent to record lows as the struggling bank announced it needed a larger-than-expected bailout package of 19 billion euros, according to WSJ.
Spain may recapitalize Bankia with debt, rather than cash, to replenish its dwindling coffers.
Prime Minister Mariano Rajoy insisted, however, that Spain would not seek European funds to help recapitalize its banks.
There has been specualtion 3 other Spanish banks which have already been nationalized, Banco de Valencia, Novagalicia and Catalunya Caixa, may require bailout funds as well.
The high borrowing rate available to Spain spells trouble for its recovery, however, as Ireland and Portugal were both forced out of capital markets and forced to seek internaitional bailouts when their yields rose above 7 percent.
Bankia was formed from 3 smaller banks. It suffered heavy losses in the collapse of Spain's real estate market, which subsequently triggered a sovereign-debt crisis.