Bankia Listed as Junk Status, Asks for €19 billion

Just days after Spanish regions announced refinancing plans for €36 billion, Bankia has requested an additional bail out from Spanish tax payers. Originally the bank had posted a profit of €309 million. A short while later, the group has reconfigured their revenue and requested a total of €19 billion in bailout money. Previously, the bank had already received a total of €4.5 billion in bailout money.

As the fourth largest bank in the country, Bankia plays a strong role in any hope of recovery for the nation. With the large Catalan region struggling to pay bills, Bankia seems to be the next area of the Spanish economy to be hit by the downturn. Friday’s request for €19 billion only further entrenched the money woes suffered by the Spanish government and people. Standard & Poor as well as Moody’s have slashed their credit ratings for the country. Currently, Bankia is considered junk status by the credit rating companies and Spanish governmental bonds seem to be fast approaching the same rating.

Catalonia has also warned the Spanish government that they may not be able to pay on their provincial debts. Government borrowing costs have only been increasing. The president of Catalonia, Arthur Mas, recently spoke to reporters about exactly this issue. His provincial government expressed the belief that how the money was obtained did not matter—all that mattered was that Catalonia received enough to pay their bills. As one fifth of Spain’s economy, the ability of Catalonia to recover from the recession is vital for the recovery of Spain as a whole. Without adequate funding, banks and provinces in Spain will have a difficult time recovering from the economic downturn in future months or years.

As a result to debt issues, ten year Spanish bonds have moved up 15 basis points. Currently, these bonds are at a dangerously high 6.26 percent. On the Ibex stock index, Madrid reported a drop of 0.6 percent. In comparison, most stock markets around the world managed to be neutral when averaged out for the day.

Originally, Spain believed that €8 billion would be enough money to finish the refinancing for the year. As more banks and governmental agencies turn in their numbers, the bailout has quickly approached a total of €36 billion. In response, global investors have started to shift their money to safer markets. Government bonds in the United Kingdom dropped to a record low of just 1.75 percent. In addition, French bonds also dropped to just 2.5 percent.