Bankia Bailout Proposal Shakes Spanish Financial Markets

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Spain's financial markets suffered a setback on Monday, as news circulated of the government's plan to bail out Bankia, the nation's fourth-largest lender. Shares of Bankia itself dropped by more than 28 percent in trading at the start of the day.

The dip in Bankia's fortunes affected the stock prices of all of Spain's other major banks on Monday as well. The instability of the nation's financial institutions is reportedly raising international concerns that Spain will ultimately require a bailout or some similar form of intervention by the eurozone in order to get back on track.

Here is some of the key information surrounding Bankia's troubles and its effect on Spain's financial stability.

* Bankia has asked for an additional 19 billion euros in bailout funding from the Spanish government. This follows a bailout of 4.5 billion euros earlier this month. The total, of 23.5 billion euros, is the largest bailout ever in Spain.

* That money would reportedly come from the Fund for Orderly Bank Restructuring (FROB), which is backed by the state, according to AFP.

* Bankia was formed in 2010, when seven other struggling financial institutions merged. Its stock was first offered in July 2011, but had lost more than 70 percent of its initial value even before its losses on Monday.

* Spain itself now owns 45 percent of Bankia, which makes it the financial group's majority shareholder.

* Bankia's troubles have far-reaching consequences for the nation as a whole. On Monday, the amount of interest that Spain is having to offer to sell government bonds jumped, as did its risk premium, according to El Pais. Both of these increases will make it harder for the nation to gain control of its budget deficit or curb its rising debt.

* Prime Minister Mariano Rajoy has blamed doubts about the stability of the eurozone in general, as well as the nation's deepening recession and decimated housing market, for Bankia's troubles, and has also said that he fully expects that the government will recoup the 23.5 billion euros that the institution has requested in bailout funding, according to Euronews.

* Rajoy has played down fears that Spain will seek international aid in order to stabilize its banks, saying that it will be unnecessary. He has, however, voiced his support for a stipulation that would allow for the eurozone bailout fund, dubbed the European Stability Mechanism, to lend directly to banks, rather than having to go through individual nations or the rest of the eurozone in order to bail out financial institutions.

Vanessa Evans is a musician, traveler, and freelance writer with an interest in European studies and events.

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